Posted: Mar 30, 2008, 3:26 PM CST
Serenity1971 wrote:hahaha
Unfortunately that's already happening. There are several people losing their homes due to the fact that when they got their original mortgages, they did an adjustable rate mortgage. The rate has sky rocketed and people that were paying $850 a month for their mortgage are now having to pay $2000 a month. It's heartbreaking to see many of these families lose their homes and that most of them put everything they had into them.
I have to say that this particular post upset me so bad that I wasn't even going to post at all. The more I think about what you say the more I have to post.
First of all lets put some perspective on the reason why people CHOSE to get an ARM. They either refused to put any monies of their own into OWNING a home and had to have 100 -107% financing with closing costs included so they came to the table with NO MONEY, or their credit was so poor they could only get and ARM at 80/20 or and FHA with 3% down. Now lets add into this equation that we also had option ARMs out there where people have a CHOICE of which payment they want to make. IF THEY chose to make the neg am payment they were told in advance what would happen. For those of you who are not familiar with what this is I'll explain. Option ARM gives a choice of making 4 types of payment. 1. Less than an interest only payment, where the balance of the interest is added to the back end of the loan. ie: if your interest is at 5% and the option is at 2% then 3% is added to the back end.So yes you could end up owing more than the property is worth. 2. Interest only payment, making the payment on 5%. 3. normal interest and principle payment. AKA PI payment. 4 normal PITI. Principal, Interest, Taxes & Insurance AKA Fully Amortized Payment.
Most people who chose the option arm chose to only make the first type of payment due to many reasons. These loans are now coming up. These are the loans that had 5 to 10 year options on the payments. The people who have these loans were FULLY DISCLOSED to before and at the closing table. They knew and know what they have and had. They also knew it was a way for them to purchase more than they could realistically afford.
Do I feel sorry for them? No. These people need to take responsibility for their own actions and quit blaming the government and banks. Yes the banks have their responsibility as well. They in turn lent money to people that have never paid a bill in their lives and wanted the moon. Yes the interest rates have risen and fallen and people that had normal ARMs also knew they needed to build their credit up so they could refi in 2 to 3 years to a fixed interest rate. Some did and most didn't.
Because banks lightened up on lending practices from the past and gave chances to people that would have NEVER had a chance to OWN a home and because it was abused, now the government is going to have to step in and put more regulation on an already over regulated industry and try to open up the secondary mortgage market. The lending practices have already spilled over to all types of loans such as the auto industry, credit card industry and education. The FED has a hell of a mess on it's hands and it's not just the banks responsibility.
The implosion of the financial markets: click here to read the entire thread »