Shared Top Border
sdcia_head3.jpg (14795 bytes)
SDCIA Message Board
Register Latest Topics
 
 
 


Reply
  Author   Comment   Page 1 of 2      1   2   Next
RobertCampbell

Senior Member
Registered:
Posts: 7,197
Reply with quote  #1 

 

In spite of threats from govt regulators to tighten the underwriting standards on creative mortgage lending, it's clear to me that they have failed to do so.  No surprise though.  Govt regulators act AFTER an economic crisis hits, not BEFORE it hits.

 

Now my question ....

 

If a property owner is in arrears on his/her funny money mortgage loan, what kind of equity cushion must be present before the property can be refinanced to bring the loan current?

 

In the past, when mortgage lending standards were WAY more stringent than they are today, a 30% equity requirement was the minimum standard before a "foreclosure bail-out" loan would be approved.

 

Is 30% equity still the standard today ... or can defaulting homeowners re-finance with less than 30% equity (such as 0% equity)?

 

Thank you.

 

Robert Campbell

 

 

AlexL

Senior Member
Registered:
Posts: 298
Reply with quote  #2 

To answer your question, it's right now about 20%. Nobody is going to bail out at 0% equity. There is nothing to bail out.

 

To answer your "preface" about the funny money loans as you call them, I have to disagree completely.

 

(1)  Loan products that are out there are a direct response from the lenders to the demand of the market. They allowed many consumers to get into the real estate ownership that they wouldn't be allowed otherwise with the fast appreciating market as it is.

 

(2)   Credit Card companies have been around for many decades with their 0% teaser rates that then go to 29%. Do you ever see your "funny" mortgage go up to 29%?

 

Mattress companies have been selling their mattresses for decades: buy now, don't pay interest until July 2008, while front loading their product with 24% interest. It's the same as selling a mortgage with 10 points and prepaid 2 years of interest in there already, but nobody minds it and thousands of people rush to the stores to "take advantage of great mattress financing" (same with cars, furniture, big screen TV's and RVs)

 

Finance companies have been around for decades (Associates, Beneficial, Household) advancing troubled people loans at 24%, nobody complains about them nor calls them "funny" lenders.

 

So, why all of a sudden people got into this STUPID mode of calling those loans "funny" mortgages??? Somebody said it about year and a half ago, and all of a sudden bunch of "consumer advocates" with too much time on their hands and aspirations for cheap political votes started using it as a slogan for their political agendas. I don't see them complaint about, mattresses at 30%, Cars at 20%, Finance company "consumer" loans at 29%, etc.etc.etc. 

 

So, my question, if these "funny" mortgage products allowed many people to become millionaires, what's so funny about them? I don't see too many people becoming millionaires due to "great only-this-weekend financing" on their mattresses.  This discussion is the same as trying to tell everybody that the missionary position should be the only one allowed, everything else is "kinky sex".

RobertCampbell

Senior Member
Registered:
Posts: 7,197
Reply with quote  #3 

Alex,

 

I assure you that what you call "stupid" is not considered "stupid" by other economic minds.

 

Robert Campbell

 

 

2Encinitas

Avatar / Picture

Senior Member
Registered:
Posts: 689
Reply with quote  #4 

Both sides of the issue can be supported.  New Aggresive loans are a great tool for some.  However, the public needs to be better educated on the loans themself. 

 

We need to teach the family who get's a pick-a-pay mortgage to make the minimum payment if and only if you are investing the surplus wisely.  Are you putting the money away or are we buying the Expedition?

 

Don't throw the baby out with the bathwater.  Our consumption mentality has really created a negative (no pun intended) view of these great loan products.  But for those who are wise and are willing to sacfrifice today for today, these products are awfully powerful.

 

Stupid...maybe?  But only if you go to starbucks everyday when you actually can't afford to make a fully amortized payment!  Cheers.  Chai Tea on me!


__________________
Todd Toback
Subscribe to the No Limits Investing Podcast on Itunes: http://itunes.apple.com/us/podcast/no-limits-podcast/id525192157

http://www.nolimitsrealestateinvesting
Twitter: http://twitter.com/toddtoback
Facebook: http://tinyurl.com/7b2yudx
samzell

Senior Member
Registered:
Posts: 688
Reply with quote  #5 

"Is 30% equity still the standard today ... or can defaulting homeowners re-finance with less than 30% equity (such as 0% equity)?"

--->Not sure on foreclosure bailout.  Really depends on how many late pymts, how far into default, credit score.

 

On the "funny loans" I agree with Encinitas and Alex makes some good points.  Interest-only ARM's and neg am's are excellent products for those who understand them. 

 

I think there are 2 primary problems, mostly resulting from new, unexperienced, untrained loan officers who don't explain the loans to financially ignorant borrowers:

 

1. Often those gettting interest-only fixed hybrid ARM's (especially 2 & 3 year fixed ARM's) are not fully aware of the index's and margin's these ARM's products are based on.  And they are not fully cognizant that their pymts could rise by $1,000 per month on the expiration of the fixed period when the loan adjusts to the index+margin and becomes fully amortized.  This is especially true of subprime 100% financing with a 2 or 3 year fixed IO ARM. The IO periods are only 2 or 3 years (vs. 10 yrs for prime IO loans) and the margins and index's are particularly vicious.

 

2. With the neg am ARM's, many borrowers are not fully aware how these loans work.  They are not aware that their "fully indexed" rate can be 7-8% slowly eating their equity.  And they are not fully aware of the consequences when these loans "reset".  When they orignal loan balance negatively amortizes to 110% to 125% of the original balance, the loan recasts to be paid off over the remaining life of the loan fully amortized over the remaining term.  This can result in a HUGE payment jump.  Also unethical mortgage brokers out there give borrowers 3 year hard pre-payment penalties without explaining this and give borrowers higher margins then need be to make themselves more money.

 

Problem with the 2 above scenarios is if when these fixed periods end or loans get "recast", that borrower better not have ruined their credit or lost their job or they will be in real trouble in a flattening or decling real estate market.

 

With that said, IO loans and neg ams are TREMEMDOUS products for investors and financially savvy.  But when poor, unethical loan officers don't fully explain them to ignorant borrowers, they could be trouble.

 

AlexL

Senior Member
Registered:
Posts: 298
Reply with quote  #6 
Quote:
Originally Posted by RobertCampbell

Alex,

 

I assure you that what you call "stupid" is not considered "stupid" by other economic minds.

 

Robert Campbell

 

 

 

Robert, don't confuse "economic" minds and political "minds". Former believe in market forces of supply and demand, which is exactly how those loans and other financial products came about. The latter ones believe only in empty pompous pretexes of clouding public minds for their own agendas. I've yet to see one serious ECONOMIST who would say that the loans other than 30-year fixed product are bad for consumers.

 

Here is the point to ponder: ANY mortgage loans do two things:

(1)  Earn interest income for the bank;

(2)  Put consumer in debt for a long long time. PERIOD!

 

So based on this VERY LOGICAL statement, the only politically correct way in the eyes of all these critics is to buy a house all cash. ANY loan would be bad, i.e. "funny". Why is this not a logical extension of any discussion about "funny" loans?? That's why I do consider those discussions STUPID.

 

 

 

 

taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,063
Reply with quote  #7 

I have a friend of a friend who just bought a home in San Diego (about 6 months ago). Paid $850k on a 100% IO loan with a 1% teaser loan. Paymnt is only about $700 a month. In about 6 more months the payment will go to about $5k a month. The home will also be worth about $800k. The friend of the freind is a manager at Taco Bell in Scripps Ranch. What is the chance of him making it past 3 months when the teaser is over?

My above example is extreme, but don't we all know someone who is in this boat?

For those of you that are into forclosures, what is the typical scenario you run into? Is it the above?

Anyone having problem with the spell checker, it does not seem to be working.

__________________
------
AlexL

Senior Member
Registered:
Posts: 298
Reply with quote  #8 
Quote:
Originally Posted by samzell

 

With that said, IO loans and neg ams are TREMENDOUS products for investors and financially savvy.  But when poor, unethical loan officers don't fully explain them to ignorant borrowers, they could be trouble.

 

 

Very good point. The problem is not that these products are bad or "funny" or "aggressive", the problem is that the real estate finance industry is LOOSELY REGULATED by organizations that are only interested in licensing fee income, and are not interested in real education for the loan officers and brokers. I've raised this point over and over again: Especially in California, mortgage licensing education is NOT EXISTENT!!!. There is no requirement by the state for a loan officer to learn anything about mortgage lending prior to becoming a licensed REAL ESTATE sales person . Those are two different fields, however, they lumped them under one license, why?? 

 

- A good real estate agent doesn't necessarily translates into a good Loan officer and visa versa, there are only a handful who are good at both that I know of.

- Why in California there is a CFL license loophole that allows schmucks and criminals to get into mortgage lending not only without any license but also without ANY background checks, which would allow any bank robber, pedophile and embezzler to become your friendly neighborhood loan officer??

- Why are lawyers allowed to practice ALL aspects of real estate law in California? What makes an ambulance chaser a prolific consultant on your financing options, they don't teach that in the law school.

 

Those are the questions to ask your regulators next time you discuss real estate in California with them.

 

 

 

RobertCampbell

Senior Member
Registered:
Posts: 7,197
Reply with quote  #9 

 

Alex,

 

>>>> I've yet to see one serious ECONOMIST who would say that the loans other than 30-year fixed product are bad for consumers.

 

DUH.  No well-trained economist would EVER say that.  Don't be silly. 

 

Maybe the term "irresponsible lending" would give you some added insight into what I mean - and what other people mean - when the term "funny money" loans is used.  Like giving someone who makes $16.00 per hour a stated income $600,000 Neg-Am loan.  However you want to define it, this is what is commonly known as a "funny-money" loan.

 

After a roaring bull market where housing affordability is all time lows, the kind of loan I just described is not responsible lending:  mortgage lenders know it, mortgage brokers know it, the regulators know it, and anybody with more than two brain molecules of commonsense knows it.

 

For those of you reading this post, just so you don't think I'm not open-minded to different types of mortgage borrowing, I think 100% LTV loans, I/O loans, Neg-Am loans, etc are the way to go for the right borrower, for the right property, and at the right time in the market cycle. 

 

Robert Campbell

 

 

 

 

 

 

 

 

brokerbrian

Junior Member
Registered:
Posts: 17
Reply with quote  #10 

      I have yet to come across ONE AVERAGE HOME OWNER in the real world that has a neg AM loan (pay option ARM, deferred interest, pick a payment, power option arm call it what you will it is all deferred interest) that actually understands really how their loan really works.  The Loan Officer collects a $10,000 check while the client is left scratching their head and in a product that does not meet their needs.   Like mom always said if it sounds to good to be true..... If anyone EVER finds a lender that loans money at 1% fixed rate without negative amortization let me know cause I want millions so I can make each monthly payment with their money and have the rest at my disposal.

AlexL

Senior Member
Registered:
Posts: 298
Reply with quote  #11 

Brian, since you revitalized this thread, if you were on this forum a little longer you would have learned from my posts on this board for the last three-four years (and from my seminar at SOCALCIA last week) that I'm a big proponent of tougher licensing standards for loan officers completely separate from the realtors. I also wrote several letters to the Governor and the Department of Real Estate recommending an additional certification that would allow a loan officer to sell Neg Am or Option Arm loans. You would not be able to sell them without such certification!

 

By the way, I found that in Riverside county, where I believe you are located, and in Imperial county the educational level of both the loan officers and consumers is exceptionally low, I see more fraud, customer abuse and flat out incompetence coming from those two counties than the entire San Diego and Orange County combined. Don't ask me why, just my observations over the last six years.

 

Cheers

 

 

 

sagemark

Junior Member
Registered:
Posts: 12
Reply with quote  #12 

Alan Greenspan and the Chair at the US Treasury both have Option ARMs for their moortgage on their personal residences.

 

Nuff said...

 

If we simply evaluate the cost of borrowing against the net return on re-investment, or opportunity costs, then the Option ARMs can, and do, make sense. 

 

It's not the most appropriate product for every borrower, that's true.  But the media would like to make it out be the "plague", which it is not.  Option ARMs, Interest Only mortgages and other hybrids is what is affording home ownerships in many areas of the country. 

 

I look at it as evolution...the market, financial products, and services are evolving to better service the consumer.  However, to this end, it is the fruduciary responsibility and moral obligation of the loan officer to coach clients as to the pros/cons of these prodcuts.

Jeff

Avatar / Picture

Senior Member
Registered:
Posts: 1,576
Reply with quote  #13 
Quote:
Originally Posted by sagemark

Alan Greenspan and the Chair at the US Treasury both have Option ARMs for their moortgage on their personal residences.

 

Nuff said...

 

 

With respect...do you have a reference for this interesting "fact."


__________________
Please God, make the second million easier...
sagemark

Junior Member
Registered:
Posts: 12
Reply with quote  #14 

This is public knowledge and you should be able to find this on your own...respectfully, I have not only heard this statement from several credible sources, but also recall reading about it in the paper. 

 

It's a moot point, really.  The commentary on this thread is lacking substance and offers too much bias. 

 

I would like to know how someone can say a 30, 40, and now 50 year fixed, fully amortized loans make sense when the majority of US homeowners own their homes for an average of less than ten years (source: US Dept. of Economics).

 

When someone in their 50s takes out a 30-year fixed mortgage, I ask them how much of their P&I payment will go to the principal.  It often is less than 10% of the total payment.  Then (I say), well...that sounds like you're paying an interest only loan payment with a small principal payment at a higher rate...then I follow up with "why not do a 7 or 10 year fixed interest only loan at a lower rate and earmark an additional amount toward principal?" 

This often winds up being the better deal for them...not to mention that when a 50-60 year old takes out a 30-year fixed they are more often doing so b/c of their comfort with the product, not based on financial savvy.

 

Who wants to keep working toward paying off their mortgage at the age of 75, 80, or 90 years of age?  Just take out more insurance -- much cheaper in the long run.

taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,063
Reply with quote  #15 

I think the issue, at least lately has been that there is not a "big enough" difference in rates for it to matter.  I recall last year getting a 7 year IO loan, and at that point in time it was cheaper to get the 7 compared to the 5 year loan.

I have a 15 year loan on my primary locked in at 4.875% with bi-weekly payments.  What do you think the chances would be for me if I got a 10 year IO loan, and then choosing to pay the 15 year rate?  NONE, NADA, NEVER. 

 

Anyone here have an IO loan and pay extra to principal consistantly each month?


__________________
------
Jeff

Avatar / Picture

Senior Member
Registered:
Posts: 1,576
Reply with quote  #16 
Quote:
Originally Posted by sagemark

This is public knowledge and you should be able to find this on your own...respectfully, I have not only heard this statement from several credible sources, but also recall reading about it in the paper. 

 

 

The "I heard it somewhere" combined with the "find it yourself" response...I'll take that as a "no, I do not have a reference."

 

I have seen this "fact" mentioned several times on discussion boards (e.g. http://www.loanuniverse.com/forums/lofiversion/index.php/t626.html)

each time the poster failed to produce a reference when requested.  I am beginning to think this is an urban legend or a FOAF story.

 

This is the first time I have heard that mortgage details were "public knowledge."  Perhaps you could tell me what type of loan I have on MY personal residence?  If so, I could learn something from you...maybe you will teach me?

 

 


__________________
Please God, make the second million easier...
sagemark

Junior Member
Registered:
Posts: 12
Reply with quote  #17 

Jeff,

 

Perhpas you could employ a greater sense of diplomacy on this board rather than quoting others and throwing their opinions, comments, and/or quotes (or even mis-quotes) under the bus.

 

I take nothing personal with you, or anyone else, expressing their knowledge, opinions, thoughts, etc.

 

Mortgage information is often not public knowledge, however, the Chairman of the Federal Reserve and Secretary of the Treasury are both civil servants and I believe (not 100% sure here Jeff), but I believe there is some disclosure that comes with these positions with regard to public knowledge.

 

 

Jeff

Avatar / Picture

Senior Member
Registered:
Posts: 1,576
Reply with quote  #18 
Quote:
Originally Posted by sagemark

Jeff,

 

Perhpas you could employ a greater sense of diplomacy on this board rather than quoting others and throwing their opinions, comments, and/or quotes (or even mis-quotes) under the bus.

 

I take nothing personal with you, or anyone else, expressing their knowledge, opinions, thoughts, etc.

 

 

My apologies...no offense intended...I will work on my "diplomacy"...

 

 


__________________
Please God, make the second million easier...
brokerbrian

Junior Member
Registered:
Posts: 17
Reply with quote  #19 

  

Taddy I have an IO ARM and I do make payments towards principle each month.  I agree that people don't need 30 year fixed loans unless they are in the home they are going to stay in forever and depending on their age.  It is my personal experience that most of my clients are refinancing or selling in 3-5 years.  I personally explain thoroughly the loan product my clients are getting and give pros/cons.  I admire you AlexL for your efforts to get Loan Officers more educated in the products they are advising their clients to assume.  I am not against Neg Am loans at all but I am against LO's selling these products without explaining how it actually works.  I come across people daily that have dug themselves in a hole by listening to newly licensee Real Estate Agents who max out the margin and prepay on Option Arms just to make money without explaining anything to the clients.

     Alex I agree with the Riverside County comment also about the educational level being low and fraud being high here and it also seems to be increasing very rapidly as the market is slowing down.  I have had two deals fall apart due to buyers LO's coaching their clients on fraud with social security numbers.  Both of buyers were using a fake social security number from a deceased person.

 

Frustrated in Riverside County....

 

ISamson

Avatar / Picture

Senior Member
Registered:
Posts: 2,301
Reply with quote  #20 

The reason that seems to be avoided here that makes it still a good idea for many to get a  30  year fix even though they likely won't pay it off in  30  is called Security !

 

Millions find themselves in changing positions over the years,  some move up,  and well,  some go down in pay and lifestyle.

 

Some have devastation and some have stagnation,  but it is all an unknown.

 

So even though there are myriads of detailed strategies to use various loans for various purposes,  even the best intentions can get some in trouble,  and the Truth is that millions with good intentions and a good plan will get in trouble and wish they had a different plan.

 

How it relates here is that in  7  to  10  like you guys are talking about with these  I / O's  or whatever,  a lot can happen.

 

1  --  Interest rates can easily go to double digits,  this is not predictable over that length of time.

 

2  --  Many who thought they would refinance then will not be in the position to,  and if they chose the  I / O  they will have to anyways,  hence lose their home when it could have been avoided.

 

I could go on and on but I'll just leave it here with the point that a  30  year fix is the best option for many,  especially regarding their personal residence,  regardless of what their  "Plan"  for the future is.

 

And even if a different plan will make them more if everything goes well over the next decade.

 

 

 

 

 

 

 

cyberjb

Senior Member
Registered:
Posts: 423
Reply with quote  #21 
Quote:
Originally Posted by ISamson

The reason that seems to be avoided here that makes it still a good idea for many to get a  30  year fix even though they likely won't pay it off in  30  is called Security !

 

Millions find themselves in changing positions over the years,  some move up,  and well,  some go down in pay and lifestyle.

 

Some have devastation and some have stagnation,  but it is all an unknown.

 

So even though there are myriads of detailed strategies to use various loans for various purposes,  even the best intentions can get some in trouble,  and the Truth is that millions with good intentions and a good plan will get in trouble and wish they had a different plan.

 

How it relates here is that in  7  to  10  like you guys are talking about with these  I / O's  or whatever,  a lot can happen.

 

1  --  Interest rates can easily go to double digits,  this is not predictable over that length of time.

 

2  --  Many who thought they would refinance then will not be in the position to,  and if they chose the  I / O  they will have to anyways,  hence lose their home when it could have been avoided.

 

I could go on and on but I'll just leave it here with the point that a  30  year fix is the best option for many,  especially regarding their personal residence,  regardless of what their  "Plan"  for the future is.

 

And even if a different plan will make them more if everything goes well over the next decade.

 

 

 

 

 

 

 

 

Agree 100% with Samson, and to add to those points, investors cannot be bothered with checking each of their 20-30 loans every month and check which ones will adjust when, and so on.

 

I use 30 yr fixed plain vanilla P+I on investment props for this reason..I'd rather spend time to do the investing rather than try to figure out which loan is doing what. Thats another reason why I dont like property tax and insurance impounds to monthly payments - no control over whats going out the door. I just got a letter from one of my lenders who's adjusting payments to cover deficits in escrow accounts for prop taxes, and I have zero control. Especially when you have everything set up on autopay !

 

A funny story..I've been fighting for 2 weeks with my loan broker over the fact that I want fixed rate 30 yr loan, and each time he sends me a GFE his lender changes it to an adjustable of some kind !! I'm beginning to think these guys are damn scared of low yielding fixed int rate loans, for some reason - servicing industry will not buy their loans perhaps?

 

Vivek

 

 

 


__________________
Vishram Corporation
http://www.vishramcorp.com
sagemark

Junior Member
Registered:
Posts: 12
Reply with quote  #22 

Someone remarked that interest rates can "easily reach double digits"...well actually, anyone care to guess how many years over the last 200 years that mortgage interest rates climbed to double-digits?

 

Answer: 8 (years)

 

8 years out of 200!  The news media would like us all to believe that it will happen tomorrow in the manner they sensationalize their stories.  Drama...sells a lot of papers and magazines.

 

I used to work for a private investor who always used 30 year fixed products on his income properties as well.  It made sense...he controlled over 3,000 apartment units and imaging tracking all the notes, when they came due, when the adjustable period began, pre-payment penalties, etc. 

 

However, after 20-years of doing it this way, he was convinced that he was not leveraging as well as he could, and by simply keeping a real time spreadsheet of every note with a reminder date to begin the refi process was just as effective, and now he reinvests his money into other properties that normally would have been earmarked for his mortgage payment. 

 

Not to mention, although he often used 30-year mortgages, he would almost always (like clockwork) 1031 out of the property within 3-4 years anyway.

 

I am enjoying this thread...keep it going.

ISamson

Avatar / Picture

Senior Member
Registered:
Posts: 2,301
Reply with quote  #23 

If you insist  . . .

 

I am not going to double check your data on  8  of the last  200,  let's just pretend that is correct.

 

Now let's go to the next level,  when were those  8 ?

 

Within our own generation.

 

So,  this type of politician / corporate propaganda statistic  ( if even accurate )  does not change the point at all.

 

We can indeed easily go to double digits in the next few years when these millions of  ARM's  of all types keep popping.

 

And even at  8 %  millions will get wiped out.

 

To go further,  I ignore news media,  they are all just doing what they are told.  I brought this up from data sources that are independent of the Elite owned media sources.

 

To address your investor buddy example,  sure,  if one is in a strong position,  and one stays in a strong position,  then one can use various forms of leverage to a higher degree.

 

By definition this puts anyone involved in a higher risk position and many perish within it's grip.

 

You just got to be really confident and prepared to play the game this way,  and most likely should not.

 

 

 

 

 

 

-------------------------------------------------------------------------

 

Someone remarked that interest rates can "easily reach double digits"...well actually, anyone care to guess how many years over the last 200 years that mortgage interest rates climbed to double-digits?

 

Answer: 8 (years)

 

8 years out of 200!  The news media would like us all to believe that it will happen tomorrow in the manner they sensationalize their stories.  Drama...sells a lot of papers and magazines.

 

I used to work for a private investor who always used 30 year fixed products on his income properties as well.  It made sense...he controlled over 3,000 apartment units and imaging tracking all the notes, when they came due, when the adjustable period began, pre-payment penalties, etc. 

 

However, after 20-years of doing it this way, he was convinced that he was not leveraging as well as he could, and by simply keeping a real time spreadsheet of every note with a reminder date to begin the refi process was just as effective, and now he reinvests his money into other properties that normally would have been earmarked for his mortgage payment. 

 

Not to mention, although he often used 30-year mortgages, he would almost always (like clockwork) 1031 out of the property within 3-4 years anyway.

 

I am enjoying this thread...keep it going.

samv

Senior Member
Registered:
Posts: 69
Reply with quote  #24 
Quote:
Originally Posted by sagemark

Someone remarked that interest rates can "easily reach double digits"...well actually, anyone care to guess how many years over the last 200 years that mortgage interest rates climbed to double-digits?

Answer: 8 (years)



Wow! I did not know that they have data for mortagage interest rates going back 200 years. Seriously can you give us a source for any interest rate data for years 1800 to 1900?
Venator

Avatar / Picture

Junior Member
Registered:
Posts: 39
Reply with quote  #25 

Quote:
Originally Posted by samv

Wow! I did not know that they have data for mortagage interest rates going back 200 years. Seriously can you give us a source for any interest rate data for years 1800 to 1900?

 

Careful...he is a little sensitive about being asked for a reference...

 

brokerbrian

Junior Member
Registered:
Posts: 17
Reply with quote  #26 

   I am finding a little bit more than 8 years in double digits in the past 25 years with more than a few years in the high 9% range just from 1972.  My opinion is interest rates won't go into double digits anytime soon unless the FEDS really want a mess on their hands in many states.  With the number of ARM's coming due and from what I am seeing of credits scores starting to decline it should be interesting in the next few years.  I am seeing allot of borrowers that have stretched their payments with Interest Only and Option Arms along with lower credit scores and slower if any appreciation at all in the last 12 months that should prove to be interesting times.  How much looser can they get with home loans and still have security????  From Interest Only, Deferred Interest, 40 year ammoritization and now some lenders offering 50 year home loans.

 

Source Freddie Mac

Mortgage Rates -- 30 Year Fixed Contract Rate and Points
Annual Averages



Also view the Monthly Averages page.

Year Rate Points
1972 7.38 0.9
1973 8.04 1.0
1974 9.19 1.2
1975 9.05 1.1
1976 8.87 1.2
1977 8.85 1.1
1978 9.64 1.3
1979 11.2 1.6
1980 13.74 1.9
1981 16.63 2.1
1982 16.04 2.2
1983 13.24 2.1
1984 13.88 2.5
1985 12.43 2.5
1986 10.19 2.2
1987 10.21 2.2
1988 10.34 2.1
1989 10.32 2.1
1990 10.13 2.1
1991 9.25 2.0
1992 8.39 1.7
1993 7.31 1.6
1994 8.38 1.8
1995 7.93 1.8
1996 7.81 1.7
1997 7.6 1.7
1998 6.94 1.1
1999 7.44 1.0
2000 8.05 1.0
2001 6.97 0.9
2002 6.54 0.6
2003 5.83 0.6
2004 5.87 0.7
Source: Freddie Mac
sagemark

Junior Member
Registered:
Posts: 12
Reply with quote  #27 

I guess my source wasn't as credible as I initially thought - thank you for sharing.

 

 

ISamson

Avatar / Picture

Senior Member
Registered:
Posts: 2,301
Reply with quote  #28 

In Bruce Norris' California Series  ( Comeback to Countdown to Crash )  he has a chapter which shows the changes in prices and the changes in payments due to incremental interest rate changes,  which fuel the Cycle to accelerate or slow down in whatever direction it is already going.

 

It is a simple formula that can be recreated on any amortization calculator.

 

You can see from the previous Post that most of the last  30  years were much higher than today,  and if we get back to even a moderate  8 %  millions will have their payment jump so high that they will not be able to refinance or afford it the way it is.

 

 

Venator

Avatar / Picture

Junior Member
Registered:
Posts: 39
Reply with quote  #29 
Quote:
Originally Posted by sagemark

I guess my source wasn't as credible as I initially thought - thank you for sharing.

Even though you were wrong (again?) about what you originally emphatically stated as a "fact"...at least you didn't attack the person who requested that you back up what you say with a reference. 

 

That is improvement in my book...congratulations!

 

But I will remember, in the future, that your confidence in your "facts" is not correlated with whether or not you are right...and that your standards for "sources" are not high...

 

sagemark

Junior Member
Registered:
Posts: 12
Reply with quote  #30 

If you would like to turn this into a campaign to assasinate my character and competence, then that's your business...I will say, my source was a 27-year veteran in the business and they made it clear the data came from http://www.mortgage-x.com

 

Since I had no reason to doubt, I never thought about the validity of her remark at that time, albeit in retrospect I should have audited the data myself before sharing this informaiton with others.

 

I don't have a problem with admission of fault, or being wrong about somethine, which speaks more of my character than not understanding the concept of humility. 

 

What I lack patience for are those who will prey and exploit this of others with an agenda to belittle those in the wrong on a public forum, such as this one...careful, we all have made mistakes...and I am sure there have been plenty of mistakes that you have made and would not care to recall.

 

No need to come back with more retoric of how I was so confident in my facts and sources....YADA, YADA, YADA.  I admit that my initial feed was too confident given the source, but I will learn not to post on here again without confirming the information in advance.  Additionally, I will not sit idle as you campaign against me as if your agenda is to cause more damage beyond pointing out my mistake.

 

I attend the meetings and we may very well run into one another.  My contacts in this organization are well established and trust-worthy.  It is my hope that the negative context of these threads end here and we can all move on. 

 

I am good at what I do...this I know.  My clients are all investors, and there has never been a deal that I have placed investment capital in that didn't yield a net positive return.  That spans north of $60 million in transactions...so my confidence may come across as "over confidence", but in no way do I pretend to know it all...nor should anyone else.

 

 

Previous Topic | Next Topic
Print
Reply

Quick Navigation:

Easily create a Forum Website with Website Toolbox.

Policy