Does this piss you off??

This is really the only big problem. The reality is that the homeowner is still getting the shaft, because they will pay the mortgage for 5 years and it still won't have equity.

Another example of rent being better.

Those homeowners who are getting 'bailed out' on these types of properties are better off walking away and renting.

 

They really aren't getting much of a shaft though. They just walk away free and clear from a property that's worth half what they bought it for. Other than the 7 years of bad credit (which I'd happily sell for 300 - 500K), they have no obligations.

And whoever holds the mortgage gets fucked.

Bottom line is this - there is no reason that it need come to this, because all these people would hav eto do is call up their mortgage holder, tell them the deal, and negotiate a solution. I've done call listening in the Loss Mitigation area here, and it's pretty intersting stuff.

 

Dude did you read my post?

The mortgage holder does not get fucked if they don't have to try to sell a home that's only worth 75% of the note.

If the 'bailout' keeps the homeowner paying something, and over time the equity increases enought that the note eventually gets paid to the mortgage holder, the mortgage holder wins big. The homeowner does not.

If the homeowner just walks off and takes the credit hit, the homeowner is much better off.

 

I meant the bank that holds it, not the person.

 

That's what I meant. So we agree.....

Thing is, these homeowners are the same ones that bought houses they couldn't afford, so they'll think they're being helped out......

I guess as long as it feels good lol.

 

That will depend on what happens to property values. If they stay in the shitter, it's just delaying the inevitable - like you said. If tehy shoot up, then they are golden.

Given the overcapacity in the market right now though, these folks aren't probably going to like what happens over the short haul.

What's nuts is that the current spread between mortgage rates and teh 10 years is at levels where we should be in a refi boom. No one knows what is going to happen though - it's really fucking with planning for '08.

I love being able to observe this stuff from so close.

 

Kinda like lesbian lovemaking!!

 

Those aren't the 2 or 3 year arms they are talking about. Those are known as Pay Option Arms or Pick a Pay. They have a LOW rate (1-3%), an interest only option, a fixed option, and a 15 year fixed option. There are other types.

If you elect to pay the 1-3%, the difference between that payment and what you should have paid on the IO option is added BACK to the principal. These were huge in Cali...and are causing a shit storm. Countrywide was HUGE in these. Wachovia even bought a company (World Savings) that ONLY did this type of product.

 

Looks like regulators are looking to fix the lower ARM rates for 5 years. I want my 30 year fixed rate to match whatever the low ARM rate mortgage holders get, for at least 5 years. Yes, I know I'm dreaming.