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173 Comments
- shadow9939, on 10/11/2007, -2/+54And people scoffed when I took a higher fixed rate.
- JackBurden, on 10/11/2007, -0/+44Just another day closer to the buying opportunity.
- jmpeagle, on 10/11/2007, -4/+40it's coming to all of America with unfunded liabilities stacking up to the tune of 40 trillion dollars on an accrual basis much more than the biased and most reported 9 trillion debt that the government has. The dollar will tank in 5 or so years as the dollar loses viability as the world's reserve currency. Already countries are switching more assets to the sterling and Euro. Once foreign governments stop underwriting our mortgages and other forms of borrowing is the day we all get collectively *****.
Politicians and the Fed have kept the interest rates artificially low as evidenced by the negative savings rate in this country and it will bite us in the ass hard. This is merely one symptom of a much larger disease. - SickMonkey, on 10/11/2007, -0/+26I've had been a loan officer for seven years and I knew this was coming. The biggest crooks were the lenders/mortgage brokers who were pushing the 1% start rate negative amortization mortgages where people's interest rates would slowly go up over time as they also slowly lost equity in their homes.
I had several clients call me about these type of loans after getting fliers in the mail and I advised them all not to take them. One didn't listen and it cost her $26,000 in pre-payment penalties to get out and she almost lost her home in the process. Her new payment is double the start rate of her old one.
Lending is a sleazy industry. The most successful people in it have the least amount of integrity, so that is the primary reason I don't do it anymore. - JESUSREAM, on 10/11/2007, -0/+21Does this mean the end of those stupid ads with the dancing alien and black chicks?
- joshshu, on 10/11/2007, -0/+21patrick.net is all about that
- dpcdomino, on 10/11/2007, -0/+20Let's see...you want us to lend you 100% of the purchase price and you do not want to show us your income? SURE WE CAN DO THAT!!
I bet most banks are buying hindsight glasses.... - DCMacHead, on 10/11/2007, -0/+20I'm in your camp, but I think it's gonna be another year before I jump back in. I think when all is said and done, you'll need 20% down, full documentation, a notarized note from God, and your left testicle pledged as collateral to get a mortgage.
- RyeBrye, on 10/11/2007, -1/+21Can these people not refinance?
Also - people talk like the villains are the lenders... What about the retards who thought "Gee, I want this $1 million home. I make $50k a year... I bet I can afford it" - DCMacHead, on 10/11/2007, -0/+17Unfortunately, everybody could get boned if they need to sell their house soon. At this point, the pool of qualified buyers is rapidly diminishing--the asset backed market is becoming considerably more discerning regarding what typs of mortgages it will buy. Unlike the olden days, banks sell their loans quickly and those loans are packaged up into securities that become mortgage backed securities or collateralized debt obligations (a pool of different kinds of debt). If a particular type of mortgage shows sh*tty performance stats, asset backed buyers will stay away from them. That's the point in the cycle where we are now--the asset backed buyers won't put decent bids on low doc/no doc loans, high loan to value loans, or interest only mortgages.
Those were the types of financing that were used to enable people to buy houses in recent years for more affordable monthly payments. Now, with financing options evaporating, that diminishes the pool of qualified buyers considerably at current prices. I think we're in for a bloodletting of epic proportions as this thing unwinds. Everyone believed the real estate mantra: 1) there's only so much land or 2) real estate never goes down. - chowdah, on 10/11/2007, -0/+16It's time for all the people out there running around acting all rich and better than everybody else to pay up. Most people were thinking that taking equity out of their homes was like withdrawing money with a debit card, when actually it was more like using a credit card because the 'equity' was never actually there. Suckers.
- mogus, on 10/11/2007, -0/+14I think I'll subscribe to Warren Buffet's advice: "Be fearful when others are greedy and greedy when others are fearful". Not that I enjoy seeing people stricken with fear trying to unload their house, but if I score a phat pad, so be it.
- combustion8, on 10/11/2007, -1/+13So I glad I chose to hold out for this... someones misfortune is going to give me the house of my dreams.
- mav7469, on 10/11/2007, -0/+12I hate to say this but this is great news for me. Myself and my fiancee are looking for our first house so the market is ripe with people who want/need to get out of their mortgages and are willing to drop the prices to get out.
- kazamx, on 10/11/2007, -1/+12Wow, its not often I find someone on Digg with a deep understanding of Economics. I don't believe most people in the US really understand that they are currently living inside a bubble that in many ways looks like the DotCom bubble at the turn of the century. Americas current standard of living can't be maintained in the long term, without large changes to the economy.
America can only function while others are prepared to buy their debt. Over recent years the Chinese Government has been buying up huge amounts of American debt. They have however been showing signs recently of wanting to diversify and increase their holdings in other currencies. If this happens then your basic supply and demand kicks in.
With less people wanting to buy American debt they will need to raise rates to entice people to buy it, this will force rates to rise for all Americans. How much depends on on demand. To make matters worse if some countries start selling off their current stock of American debt the market could become saturated and new debt could find it almost impossible to find a buyer, then America is in real trouble as at that point the bubble could burst. - DeskFlyer, on 10/11/2007, -1/+12Ouch. Lotsa foreclosures in the future I see too. -_-
- theNthDoctor, on 10/11/2007, -7/+18Debt is slavery.
- bigteebo, on 10/11/2007, -0/+10So I take it I went the right way when I went with a fixed rate no-frills mortgage in 2002?
- pimpinainteasy, on 10/11/2007, -0/+10Why are people so freakin dumb when it comes to mortgages? You know if you're going to spend $200k on something, get a damn book or two, or spend some cash and hire a real estate lawyer.
- inactive, on 10/11/2007, -0/+10[scene: very quiet] "I see debt people"
- TwoKings, on 10/11/2007, -2/+12My mortgage is 4.75 for 20 years (15 years left)....and my wife wants to move. Looks like I'm getting a divorce and she's moving out.
- irvman21, on 10/11/2007, -0/+9This is really good news for those of us who live within their means and may have the ability to score a nice rental property at depressed prices. I don't feel sorry for people who took on a 100% mortgage for a house they couldn't afford while buying a new Hummer and G35, you reap what you sow.
- jonathansoeder, on 10/11/2007, -3/+12Who was it that said they only call it the American Dream because you have to be sleeping to believe it?
- bdroberts, on 10/11/2007, -0/+8I wonder what is going to happen when this hits the UK, you should see the size of mortgages people have to take on here to get a house.
- SpeedoBurrito, on 10/11/2007, -1/+9This is exactly why I'm not a loan officer anymore. I knew what these people were getting into and I didn't want to be an agent to their financial demise. I got into the industry to help people and talking them into products that ads taught them they needed but didn't fully understand just wasn't part of it for me. There are plenty of loan officers that told people not to worry about it. They were getting a low rate. Borrowers signed without reading their documents or were told their questions would be answered after the deal funded and then couldn't back out. This is how the LO's made their money. Now they are trying to refinance and can't because lending standards for most companies has tightened substantially and/or their credit is a disaster now because they can't make the inflated payments.
I work for a company now that has very strict underwriting standards and calls every borrower prior to sending the loan documents to title to ensure that they have a full understanding of what they are signing. If all lenders had done this initially, and in the native language of the borrower, I think it would have prevented a great deal of this unfortunate situation.
Furthermore, I'm trying to sell my house (has nothing to do with financial distress) and due to the fact that nearly 1/5 of my neighborhood is up for sale right now, it is nearly impossible without major concessions because so many people are desperate to get out of mortgages they can no longer afford and are trying to avoid foreclosure. - darthJon, on 10/11/2007, -1/+9This is interesting. I wonder how many of these people have English "issues"? I know one family that after 15 years in this country still can only read Spanish...and all their loan papers are in English.
- VSLOATHE, on 10/11/2007, -0/+7WTF are you talking about?
Fed = Federal Reserve Bank.. - brianbb98, on 10/11/2007, -0/+7sweeet....
this will work out nicely as i'll finally be able to get a home loan here in about a year or so. home prices here suck so this should make things much better for me. :) - jmpeagle, on 10/11/2007, -2/+9the cost will stay the same though. The falling housing prices are a result of the rising interest rates making homes more expensive. It will still cost you the same amount of money to buy a home, it is just less principal and more interest.
- VAPerson, on 10/11/2007, -0/+6The person signing the contract is the one responsible for reading it. I fear a big government bail out for both the people too dumb to read the documents and for the mortgage companies that made these idiotic loans. Nothing is worse than rewarding people for acting stupidly. Especially with the tax dollars of the people who were smart enough to actually read all the docs involved in the biggest purchase of the life! But of course in America when people make mistakes it is always someone else's fault.
- SocialPoison, on 10/11/2007, -0/+6Just don't get in over your head. If you can't afford the home on a 15/30 year normal, no frills mortgage, but they want to give you *insert new loan name here* you can't afford the home, and tell the loan officer to shove it up his ass.
- norman619, on 10/11/2007, -2/+7This is only another symptom of the ***** economic health we are in. We are told to finance just about everything. Instead of using credit to purchase the large itemms like education, a car, or a home they finance vacations and other ***** they can not afford. All this debt is comming back to bite many in the ass and costing them their homes and other things. It's sad but I have no sympathy for these people. Most made their own beds.
- ArenaRon, on 10/11/2007, -0/+5This has been coming for a while now, people think that money is free. They think it is like a Mcdonalds drive through, "I will take a %100 loan, with a stated income deal, ARM, and be sure to jack up the prepayment penalty".
- Travisty2012, on 10/11/2007, -0/+5Exactly. I'm in the market for a house...but all I see is prices dropping and nothing selling. This is going to drop the price even more. Maybe in a year or so I'll be ready to jump back in...
- mav7469, on 10/11/2007, -0/+5Most of these people had bad credit to begin with. Even if they re-finance, they are going to be payinf a high rate than the orignial loan and probably higher payments.
You are also right that it is the persons responsability to only look at homes within their price range. We are looking at purchasing our first new home and the Agent is always "teasing" us with what we could get with just another $50,000. We keep saying "Yep, you are right, this is very nice, now let's go to the next one." - moosebaloney, on 10/11/2007, -0/+5Good thing I just closed my 30-year fixed. I would be in all kinds of trouble.
- SocialPoison, on 10/11/2007, -0/+5Subprime morgages were an awesome racket, it's just coming back to bite us in the ass. I read an awesome article about it in the Seattle Times.
Basically people get it in their heads that home ownership is part of the American Dream and their American Rights. It ain't. But when a lender says "Hey we'll get you into a house, zero down as long as you take a subprime mortgage."
"What's a subprime?"
"Oh it's nothing... it just means *cough*ifyoupaytheminimumtheprinciplewillstillgrowhahahasucker*cough*"
/a yougin' who gets it. - EthylAdded, on 10/11/2007, -0/+5The NINJA loan. No Income, No Job or Assets... "No Problem! How much do you need?"
- Ub3rg33k, on 10/11/2007, -0/+5Damnit. Some of us who did the right thing during the housing boom (getting fixed rate loans, understanding the terms of the loan, not buying more than we could pay for, etc.) now would like to cash out a little equity and reinvest it in home improvements. The current market is making that really difficult unless someone has some pointers I don't know about.
- norman619, on 10/11/2007, -0/+4Nope. When the gov was thikning about regulating their industry guess what they did? They fought tooth and nail. Why? Because even though common sense tells us it's a bad idea to loan money to someone with horrid credit in reality this is where they make a butt load of money.
- TideBall, on 10/11/2007, -1/+5People CAN re-finance...but the issue is, most people who initially took out ARMs did so at historic low rates. Once these ARMs become variable, the diference can be up 4.0%+ what they were initially fixed in at. If you re-finance now, you will lock in at the high rate anyways....something people may or may not be able to afford.
Loan officers have already reaped the benefits of closing huge volumes of loans back years ago during the re-finance craze post 9/11. Huge commission payouts to the loan officers, bad advice to the customers. I have worked in the banking lending industry during that time and I found it very unethical. - Screwy1138, on 10/11/2007, -0/+4They should learn English. Or hire someone to help. If I went to Spain, or Mexico, or anywhere in Central or South America, or Germany, or Japan, or.... I would not expect my loan papers in English and if I took out a loan without knowing what the foreign language is saying, I would only have MYSELF to blame.
- akatherder, on 10/11/2007, -0/+4Half of our block went up for sale around the same time. Some guy came in and flipped 6 or 7 houses. Everyone that moved in is young families with little kids. We're paying less than $1000/month on a fixed rate 30 yr mortgage for a 3 BR 2 BA house in a nice neighborhood. Our down payment was negligible (basically just the closing costs). I'm sure the property value of all the neighbors who stayed just skyrocketed as well.
You can buy a house (and the included land) around Detroit for less than it costs for just the land in most places. And I'm not talking about places where you need to bring a gun just to go out and get your mail. There are some decent neighborhoods.
Some smart, rich people are going to become even richer and look even smarter. - shauncorleone, on 10/11/2007, -1/+5It's one of the first things anyone who is home-shopping is told: Do NOT get an ARM. There's a reason I still currently rent: I'm not financially prepared to pay a fixed-rate mortgage for the kind of home I want to own.
I have a hard time feeling sorry for most of these people. There are hundreds of thousands of people across the country that consistently attempt to live beyond their means. I learned that lesson back in college. - plizard, on 10/11/2007, -0/+4and to think i got laughed at because i took a fixed 5.75%
- Archon810, on 10/11/2007, -0/+3Try http://ml-implode.com/ for a finishing touch.
- mogus, on 10/11/2007, -0/+3Did anyone see the dancing alien that was dressed like a girl with a bikini and blond hair? Now THAT was disturbing.
- smellinator, on 10/11/2007, -0/+3I'm just not buying that this is all bad.
People with ARMs get squeezed. So they sell their McMansion, maybe for a loss. But THEY STILL NEED A PLACE TO LIVE!
So they compete for lower cost housing. This "Supply and Demand" situation INCREASES the cost of lower-priced housing. People in lower cost housing will see an immediate spike in demand (if the article is true), and so there will be a sellers' market, and Homeowners in the low-cost market will sell, because they can buy a more valuable house for a small incremental cost.
Bottom line: If you can, jump in NOW into the low-cost market, and ride it up. If you plan to benefit from this trend, you'll be selling in 3 to 7 years, so DON'T get a fixed rate mortgage, and don't pay points (which often have a longer payback than that). Get a nice variable rate mortgage for about the length of time that you expect to be in the house (3 or 5 years), and profit from this trend.
The world is not coming to an end. The money is just shifting. People who own lower-priced houses will see a benefit. People who own higher priced houses will see a decline. Where do you want to be? - SocialPoison, on 10/11/2007, -0/+3Bingo.
- kazamx, on 10/11/2007, -0/+3The UK has a big bubble in the market right now. If you look on historical trends the price of houses vs income is higher than at almost any point in history. If you look at the historical trends it looks like a sound wave, goes up, goes down, goes up goes down. At the moment we are above the crest of the wave. there are reasons for this though.
1, We have had low intrest rates now for many years. People have forgotton how rises in these can effect them. So rather than build a buffer into thir calculations they max themselves out. This means a small 1-2% increase over the next few years could force many people to sell.
2, The UK has many many people moving into the country, over 100,000 per year. This increases demand for houses forcing the prices up.
3, While demand is increasing the Governemt has been making it difficult to build new houses keeping supply of new homes down.
My prediction is the intrest rates will be the thing that pops the bubble -
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