Bush's bailing out of the irresponsible Options

[impala454]

You guys are sad sometimes. You instantly hate everything I say and don't give it a second thought. It's disappointing considering how smart some of you are.

A. lenders hand out ARM loans.
B. ARM loans are set on an index X.
C. index X is set based on what lenders give out as interest rates.

Do yall need me to connect the dots too?

[impala454]

Christine: 1
Impala: well, let's face it... -4,563

Oh shut up. She wasn't even correct and you don't have a f'n clue about any of this.

[Spectatrix]

C. index X is set based on what lenders give out as interest rates [to each other, not consumers]

And the banks involved in determining the indexes are usually IN NO WAY RELATED to your mortgage lender.

You act like the whole banking industry is some Illuminati-esque conspiratorial entity that thrives on forcing their customers into foreclosure.

This post has been edited by Spectatrix: Dec 10 2007, 05:31 PM

[Mommy]

Oh shut up. She wasn't even correct and you don't have a f'n clue about any of this.

I know about this stuff. I just chose not to argue on it because you are the one that fails to listen to anybody, not the other way around. It's whatever though. I was more commenting on how she was saying it didn't matter telling you anything because you will continue to argue the opposite even if we laid out stone-cold fact that you are wrong.

[impala454]

And the banks involved in determining the indexes are usually IN NO WAY RELATED to your mortgage lender.

You act like the whole banking industry is some Illuminati-esque conspiratorial entity that thrives on forcing their customers into foreclosure.

Where the hell do you see that? And no, it's an illuminati-esque conspiratorial entity that thrives on having rates as high as humanely possible. I put mortgage lenders on almost as low of a "good business" totem pole as credit card companies.

[Spectatrix]

I'm not saying mortgage lenders are angels... far from it. I'm just disagreeing that they can arbitrarily up your rates just for the hell of it. Even if they did have a magic margin dial, there are caps built into ARMs that limit how much they can raise the rate at any given time.

From Wiki:

Loan caps provide payment protection against payment shock, and allow a measure of interest rate certainty to those who gamble with initial fixed rates on ARM loans. There are three types of Caps on a typical First Lien Adjustable Rate Mortgage or First Lien Hybrid Adjustable Rate Mortgage.

Initial Adjustment Rate Cap: The majority of loans have a higher cap for initial adjustments that's indexed to the initial fixed period. In other words, the longer the initial fixed term, the more the bank would like to potentially adjust your loan. Typically, this cap is 2-3% above the Start Rate on a loan with an initial fixed rate term of 3 years or lower and 5-6% above the Start Rate on a loan with an initial fixed rate term of 5 years or greater.

Rate Adjustment Cap: This is the maximum amount by which an Adjustable Rate Mortgage may increase on each successive adjustment. Similar to the initial cap, this cap is usually 1% above the Start Rate for loans with an initial fixed term of 3 years or greater and usually 2% above the Start Rate for loans that have an initial fixed term of 5 years or greater

Lifetime Cap: Most First Mortgage loans have a 5% or 6% Life Cap above the Start Rate (this ultimately varies by the lender and credit grade).

* Industry Shorthand for ARM Caps

Inside the business caps are expressed most often by simply the 3 numbers involved that signify each cap. For example, a 5/1 Hybrid ARM may have a cap structure of 5/2/5 (5% initial cap, 2% adjustment cap and 5% lifetime cap) and insiders would call this a 5-2-5 cap. Alternately a 1 year arm might have a 1/1/6 cap (1% initial cap, 1% adjustment cap and 6% lifetime cap) known as a 1-1-6, or alternately expressed as a 1/6 cap (leaving out one digit signifies that the initial and adjustment caps are identical).

* Negative amortization ARM caps

See the complete article for the type of ARM that Negative amortization loans are by nature. Higher risk products, such as First Lien Monthly Adjustable loans with Negative amortization and Home Equity Lines of Credit aka HELOC have different ways of structuring the Cap than a typical First Lien Mortgage. The typical First Lien Monthly Adjustable loans with Negative amortization loan has a life cap for the underlying rate (aka "Fully Indexed Rate") between 9.95% and 12% (maximum assessed interest rate). Some of these loans can have much higher rate ceilings. The fully indexed rate is always listed on the statement, but borrowers are shielded from the full effect of rate increases by the minimum payment, until the loan is recast, which is when principal and interest payments are due that will fully amortize the loan at the fully indexed rate.

* Home Equity Lines of Credit HELOC

Since HELOCs are intended by banks to primarily sit in second lien position, they normally are only capped by the maximum interest rate allowed by law in the state wherein they are issued. For example, Florida currently has an 18% cap on interest rate charges. These loans are risky in the sense that to lenders, they are practically a credit card issued to the borrower, with minimal security in the event of default. They are risky to the borrower in the sense that they are mostly indexed to the Wall Street Journal Prime Rate, which is considered a Spot Index, or a financial indicator that is subject to immediate change (as are the loans based upon the Prime Rate). The risk to borrower being that a financial situation causing the Federal Reserve to raise rates dramatically (see 1980, 2006) would effect an immediate rise in obligation to the borrower, up to the capped rate.

As for "where the hell do you see that?"... taking LIBOR as an example, why would banks in England care what mortgage rates in the US are?

[Spectatrix]

The main point I'm trying to make is that ARMs aren't as mysterious as you're making them out to be. Anybody who cares to can look at the index their mortgage will be based on and look at it's historical performance. Hartmann touched on some of this back on page 2: http://www.techsans.net/forums/index.php?s...ost&p=93045

[impala454]

Forgive me I'm not following where you're getting this UK banks stuff from.

And the caps are a joke. 2% adjustment cap? 5% lifetime cap? 2% is insane. 2% would increase most people's payments by about 40-50% (oh, btw which is exactly what's happening now). Then asshats like you guys who don't have a f'n clue come in and tell those people they're irresponsible.

[Spectatrix]

Forgive me I'm not following where you're getting this UK banks stuff from.

And the caps are a joke. 2% adjustment cap? 5% lifetime cap? 2% is insane. 2% would increase most people's payments by about 40-50% (oh, btw which is exactly what's happening now). Then asshats like you guys who don't have a f'n clue come in and tell those people they're irresponsible.

LIBOR (London Interbank Offered Rate) is one of the indexes commonly used for adjustable rate mortgages (yes, in the US). It's the interest rate that banks in England lend money to each other at. Chances are, those banks aren't the ones financing your mortgage, so why would they bump up their lending rate to affect a US bank's margin on your mortgage?

Another index used is the MTA, or 12-month Treasury Average Index. It's a 12-month average of monthly yields on US T-Bills. Pretty sure that's controlled by the federal reserve, not private banks.

[Spectatrix]

In any case, I'm out. I wash my hands of this thread. You wouldn't budge when I provided concrete information in the credit card thread and you're not budging now. I don't see why I should waste my time doing more and more research only to see you put your fingers in your ears and go "lalala, I'm right, you're wrong."

PEACE OUT, NIGGAS!

[impala454]

Uh, they all want to make money whether its UK or US. By the same token, why would they ever want to lower your rates?

But yeah, yall are all right my bad. It's just the typical dumb post by Impala. Lets just do a couple of wikipedia searches and paste em and suddenly we're all experts. Let's not look at what this bullshit really means. I mean, ARM loans are great! They're wonderful for consumers because they sure don't mass foreclose on them. And those mass foreclosures that sure don't happen are great for the lenders too, because they definitely don't discourage others from getting loans!

[Mommy]

LOLZ

[Spectatrix]

Uh, they all want to make money whether its UK or US. By the same token, why would they ever want to lower your rates?

But yeah, yall are all right my bad. It's just the typical dumb post by Impala. Lets just do a couple of wikipedia searches and paste em and suddenly we're all experts. Let's not look at what this bullshit really means. I mean, ARM loans are great! They're wonderful for consumers because they sure don't mass foreclose on them. And those mass foreclosures that sure don't happen are great for the lenders too, because they definitely don't discourage others from getting loans!

Amen, bro! Glad you finally saw the light!

Seriously, though... I really, truly agree that most banks are bottom-feeding, scum-sucking evildoers. No doubt. The bigger the bank, generally the more they suck.

ARM loans? Yeah, they suck too. I'd never buy one and I'll never have to because I have great credit, a great job, and will have a large down payment whenever I do buy a house (probably a couple of years from now). Like I said before, I only disagree with you on how "mysterious" the terms are.

Foreclosures suck for consumers. No doubt about that. But mass foreclosures are bad for lenders too.

As best I've been able to determine, this whole mess started with the housing bubble earlier this decade, with people borrowing way beyond their means and with banks willing to let them do so. The banks were greedy fucks and incredibly short-sighted, now resulting in many lenders filing for bankruptcy because foreclosures are hellaciously expensive for everyone involved. Those that aren't going bankrupt are facing billions of dollars in losses.







Why can't I quit this thread?

This post has been edited by Spectatrix: Dec 10 2007, 09:31 PM

[impala454]

Why can't I quit this thread?

Probably the same reason I never quit any thread

btw just saw the news mentioned WaMU is cutting a shit ton of jobs because of this subprime mess. bummer.

[TetraGrammaton C...]

i don't know how to quit you