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| nctnico:
--- Quote from: rstofer on July 05, 2017, 01:16:50 am --- --- Quote from: nctnico on July 04, 2017, 09:44:55 pm ---I'm wondering what exactly you mean with ARM loans? Are those so they change the interest rate every year? If yes they may not be so bad. Over here you can get mortgages where the rate changes every year. Sure there will be good years and bad years but overall the interest rate is lower than longer term fixed rates. What I did in the past few years is wait for the interest rates to drop before committing to a longer term interest rate (which is pretty sweet if I may say so). I expect the interest rates won't stay as low as they currently are for very long; I expect to see a rise somewhere in 2017/2018. --- End quote --- Right, Adjustable Rate Mortgages. It all depends on how it is structured. We just got a flyer for an ARM that started at 2.5% and, over time could get to 8% while a 30 year fixed might be 3%. The rate is intended to rise, it is not simply a matter related to the Prime rate. Bsically, the bank is lending money quite cheap in the first couple of years and making up their profit in later years. --- End quote --- Aha. That is completely different than a mortgage with a rate which follows the actual interest rates (like Euribor, Libor) + margin. |
| rstofer:
--- Quote from: nctnico on July 05, 2017, 06:43:18 pm --- --- Quote from: rstofer on July 05, 2017, 01:16:50 am --- --- Quote from: nctnico on July 04, 2017, 09:44:55 pm ---I'm wondering what exactly you mean with ARM loans? Are those so they change the interest rate every year? If yes they may not be so bad. Over here you can get mortgages where the rate changes every year. Sure there will be good years and bad years but overall the interest rate is lower than longer term fixed rates. What I did in the past few years is wait for the interest rates to drop before committing to a longer term interest rate (which is pretty sweet if I may say so). I expect the interest rates won't stay as low as they currently are for very long; I expect to see a rise somewhere in 2017/2018. --- End quote --- Right, Adjustable Rate Mortgages. It all depends on how it is structured. We just got a flyer for an ARM that started at 2.5% and, over time could get to 8% while a 30 year fixed might be 3%. The rate is intended to rise, it is not simply a matter related to the Prime rate. Bsically, the bank is lending money quite cheap in the first couple of years and making up their profit in later years. --- End quote --- Aha. That is completely different than a mortgage with a rate which follows the actual interest rates (like Euribor, Libor) + margin. --- End quote --- When you think of the US, you need to think in terms of unregulated greed! Now, greed is good, that's true, but you need to read the fine print. If you think you are getting a deal (low initial interest rate), read the fine print. You're getting hosed a little farther down the line. There are no deals! The consumer always loses and they lose more if they're stupid. Think of it as a tax on stupidity. |
| rstofer:
--- Quote from: nctnico on July 05, 2017, 06:43:18 pm ---Aha. That is completely different than a mortgage with a rate which follows the actual interest rates (like Euribor, Libor) + margin. --- End quote --- But there was some kind of jiggering the Libor rate: https://en.wikipedia.org/wiki/Libor_scandal What I didn't realize is that the Libor Rate was used in the US. |
| cdev:
They have figured out a new way to steal huge amounts of money from taxpayers, called a control fraud. The key to these huge bailouts and giveaways are a new scheme to do an end run around democracy.. (trade and investment) "agreements" where governments agree to insulate corporations from risks they always figured into their costs before. By doing this they can make mistakes of all kinds, irreversible. We're seeing our governments become thinly veiled schemes to channel more and more of all money to the insiders, looting the "peasants" everywhere of all we own in the process. See if you see a pattern here. https://www.researchgate.net/publication/237428807_THE_BCCI_COVER-UP https://www.democracynow.org/2014/6/20/a_plan_only_banksters_will_love https://www.citizen.org/documents/Memo%20-%20Unanswered%20questions%20memo%20for%20Geneva.pdf Prudential_Measures_Report FINAL Memo on Feb 2010 WTO Secretariat Paper on FS5 "That'sAllTheyGot.pdf" MEMO Gats conflict with bank size limits may-10-2011 Financial crisis Policy Primer Nov 2009 FINAL WTO-GATS-Medicare and Social Security Patricia Arnold - GATS and financial dereg Financial crisis Policy Primer 121508 public-citizen-comments-on-international-services-agreement.pdf Quote from: rstofer on Today at 07:57:11 What the banks did around here is have the beginning interest rate less than the Prime Rate. They were loaning money for less than it cost them to borrow. To recover this, the rate of increase and the maximum amount for the interest were set fairly high - much higher than a fixed rate mortgage. As the payments ratcheted up, people could no longer afford the payments. Throw in some asset depreciation, wage stagnation or job loss... The idea behind the ARM is twofold: Allow people to buy houses they can't afford in order to keep prices up and, second, hope that the asset value increases such that the buyers can sell out with a profit to use as a down payment for a different house. As the prices fell, a LOT of people realized they were under water and just walked away from their obligations. The .gov helped with this by cancelling the capital gains tax they should have had to pay. This tax alone would have bankrupted most people. Imagine suddenly owing tax on $100k (or more) worth of capital gains! All of a sudden there was a flood of houses on the market, prices collapsed and the banks and bond holders were in trouble. Had the buyers been able to hold on, they would have recovered and then some. Not every area has recovered equally but I suspect that everybody would have been fine. But they couldn't hold on because the interest rate was increasing and, really, who wants to make payments on a house that is wildly underwater? I don't object to ARMs if they are sensible but, basically, they are allowing folks to buy stuff they can't pay for. The banks knew these "liar" loans were questionable so they came up with a way to securitize the mortgages and sell the debt off as Mortgage Backed Securities. What could be safer than a MBS? In a normal market, these bonds would have been a good investment. In a crash, they were worthless. At the time I remember reading about a town in Finland that was especially hard hit because they had invested in these bonds. I was staggered that a housing problem in the US could devastate a town in Finland! Here is a discussion about Finland's national problem during the meltdown but I didn't find the article about one specific town --- End quote --- : |
| rstofer:
ARMs were, and still are, about greed! The lender wants a high rate of return later on and the buyer wants to buy more house than they can afford so they can sell it and reap a windfall. The bond holders (buyers of Mortgage Backed Securities) wanted a safe investment that paid a lot of interest/dividends. I don't have any sympathy for any of them. Particularly the buyers! They should have understood what they were signing and not base their hopes on an ever increasing asset price. Some people might not understand how the capital gains tax comes about as a result of foreclosure. The bank held a note on your asset for, say, $300k. You defaulted and they only recovered, say, $100k on their $300k investment. That's a $200k loss to the bank. Well, their loss is your gain (it has to balance!) so, since $200k is going to push the buyer into a pretty high tax bracket, they might owe the Feds about $70k and the State about $20k. So, not only would they not have a house, their credit rating would be destroyed by the foreclosure and they owe about $90k in taxes. If they couldn't afford the house payments, the really can't afford the tax hit! The .gov felt sorry for them and let them off the hook for the capital gains taxes. They shouldn't have done that! Borrowers simply have to read the fine print! |
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