ARMs are like owning guns or pitbulls. The responsible individual can handle these in a smart and safe manner. The problem is alot of dumbasses get these and it blows up in their face. Their dog attacks a child, they end up shooting their spouse twirling the gun like a cowboy, and their house goes into foreclosure because the rate shot threw the roof.

You just can't save some people from themselves, but I guess Fark would be a dull world if it were true.

NightOwl2255: Flab: Is this where we brag about our fixed-rate mortgages, and making extra payments on the principal as well to shorten the mortgage duration?

Yes, this is the place. Also, no credit card debt, a gigantic 401K, a Roth IRA that dwarfs the GDP of most nations and a large penis or breast (which ever applies).

I have a large breast.

Singular.

Nuclear Monk: Hell, even a basic understanding of the costs of selling a home wouldn't hurt if you approach house buying as three year investment.

I just relocated and the people we bought the house from lost their shorts in large part because they didn't consider the costs of selling a house, even though they knew they would only be there for probably 2 years.

On a $300k house, that's about $18k in realtor fees alone, much less all the other random costs involved. They also didn't help matters in that they did absolutely no improvements or maintenance on the house even though it was already starting to need it. All this in an area not near as 'hot' as the ones that were in the news two years ago.

Because, apparently, dumping even more money into a house for improvements, when you know you will be moving in 2 years time is a financially good thing? Especially with the market conditions such that values are dropping and said "improvements" won't raise the selling price at all?

BabyShaker: sigdiamond2000: NightOwl2255: Flab: Is this where we brag about our fixed-rate mortgages, and making extra payments on the principal as well to shorten the mortgage duration?

Yes, this is the place. Also, no credit card debt, a gigantic 401K, a Roth IRA that dwarfs the GDP of most nations and a large penis or breast (which ever applies).

So true. The avalanche of "look how responsible I am with my money" posts are sure to follow.

I also enjoy playing "spot the real estate agent" in these threads.


I'm sorry, can someone explain just why I shouldn't be proud of being fiscally responsible??

Because nobody really cares how well you're doing.
Now make with the cat pictures, puns, and photoshoppery.

grizzlyjohnson: Do they still do those convertable ARMS where you can lock in a fixed interest rate?

Never looked into a product like that. I'm primarily talking about the garden variety loan generally offered to regular folk. When the average guy goes into a bank the first products offered are generally fixed rate mortgages at 30/15 years or 5/,7, or even 10/1 ARM's whereby you get a fixed rates for say the first 5 (or 7 or 10) years and then it converts to a variable rate - something like LIBOR or COFI + 2% as an example. That said, there are many many different variations on this - I'm talking about the most common examples. If I had any advice to give I'd say the more complicated the loan structure is and the less you understand it, the less likely I'd think it to be a good option for you. As for 'interest only' mortgages I do think there's a time and place for them but they are few and far between and they are grossly overused.

JohnBigBootay: That's on them.

that's on US you mean, right????????moron.

You have got to be sh*ttin' me. Srsly? As I type this, someone in this country is losing their house RIGHT NOW because they did something stupid like take out an ARM to buy what they could not afford, helping to collapse the entire farking world economy in the process.

Now they want to do it again. This proves exactly how stupid people actually are.

/I hate people

NightOwl2255: The Corporation: I knew ARM controlling 95% of the mobile cpu market would spell doom for us all.

But did they heed my warnings? No.

Who's the ARM of which you speak? Would it be a corporation or, maybe, The Corporation?

You haven't heard of them yet because they don't want you to.

LOL. Thanks for the insight everyone.

Gwendolyn: If you know you'll be in a position to get a much better fixed rate in five years I think they are a good idea.

Do you know you'll have a job, or a job which pays at least as much in five years? If you don't know, they may not be a good idea. Many of the people who have defaulted on ARMs did so as the economy went to shiat and they lost their jobs, not just because the interest rates went up 3 or 4 points.

Not only that, why not buy the house you can afford now at your current salary (or don't if you can't afford it) instead of taking out some crazy-ass voodoo loan and hoping things change later so that you can refinance at a fixed rate?

rewind2846: Gwendolyn: If you know you'll be in a position to get a much better fixed rate in five years I think they are a good idea.

Do you know you'll have a job, or a job which pays at least as much in five years? If you don't know, they may not be a good idea. Many of the people who have defaulted on ARMs did so as the economy went to shiat and they lost their jobs, not just because the interest rates went up 3 or 4 points.

Not only that, why not buy the house you can afford now at your current salary (or don't if you can't afford it) instead of taking out some crazy-ass voodoo loan and hoping things change later so that you can refinance at a fixed rate?

I plan on buying a foreclosed property. Raleigh, NC for 50-100 foreclosed, or 100-200 regular sale.

Bo Giggity: Hey, remember those ARMs from 5 or 6 years ago that did their part to melt down the economy?

swing and a miss...how 'bout this; "Hey, remember those people who signed up for ARMs 5 or 6 years ago, didn't understand what they were signing up for, and did their part to melt down the economy by bailing on their mortgage payment commitment, expecting the federal gov.to bail them out, destroyed their properties before leaving them, or blamed lenders for preying on their stupidity, rather than take some responsibility themselves?"

subby here... I believe that's what I said, just in a much shorter sentence. Read deeply. :-)

rewind2846: Not only that, why not buy the house you can afford now at your current salary (or don't if you can't afford it) instead of taking out some crazy-ass voodoo loan and hoping things change later so that you can refinance at a fixed rate?

Whoa. That's crazy talk. Next you'll be telling me I should live within my means and only buy things that I can actually afford.

naris: grizzlyjohnson: douch

Oh, do you also have a pic of your "awesome looking", home schooled wife?

Wanna buy some?

Most people in this country have no idea what living within your means entails. They are like my 2 year old who wants what she wants when she wants it.

I would like to know how much the average person pays each year in interest payments. Getting out of debt and staying out of debt is something we should all aspire to.

Sure!! I'll take one! Why not?

I'll buy a brand new car, 7 rooms of furniture, and several LED TV's too.

When I can't afford it any longer, Obama and the taxpayers will help me out, I've got nothing to lose!

ARMs haven't gone away. they are standard offerings of all major mortgage lenders. just not usually at 3.75%.

rewind2846: You have got to be sh*ttin' me. Srsly? As I type this, someone in this country is losing their house RIGHT NOW because they did something stupid like take out an ARM to buy what they could not afford, helping to collapse the entire farking world economy in the process.

Now they want to do it again. This proves exactly how stupid people actually are.

/I hate people

I've had a couple of ARMs and it turned out just fine. If you know what you're getting into, and figure out what the payment is going to be when the rate adjusts, and you don't buy more house than you can afford, they're smart because they save you a lot of money up front when you buy a house and you're generally putting out money left and right. Like someone said above, it's not the loan that killed the economy, but the misuse of it. It's really not that complicated to understand an adjustable rate mortgage. Also it's really not that hard to understand that the mortgage broker trying to sell this shiat does NOT have your best interests at heart.

farkinawsome: that's on US you mean, right????????moron.

I find you to be very elegant, reasonable, and I think your rebuttal is extremely pervasive. I'm certain that you have an excellent grasp of the technicalities related to the matters we're discussing here and I have no doubt you are quite effective at whatever it is you do down there.

not2conceited: I would like to know how much the average person pays each year in interest payments. Getting out of debt and staying out of debt is something we should all aspire to.farking pinko commie.

JohnBigBootay: There's nothing wrong with ARM's under the right circumstances and they are often the best choice.

And this is part of the problem... no matter what humankind invests, there will be someone, somewhere, somehow who will figure out a way to use it for purposes either that are stupid or evil or both.

People set up charities to scam other people who want to donate to worthy causes. Bernard Madoff stole billions from his best friends for decades. Credit card companies... well, basically everything they do.

If lending institutions are going to make ARMs one of the products they sell, they should treat them like responsible gun owners treat their firearms... locked in a safe and unloaded, with the bullets locked away elsewhere so that children and other irresponsible persons don't get hold of them. They are much too dangerous to be tossed out like candy from a broken pinata.

Whatever the regulations are for fixed rate mortgages should be doubled for voodoo loans, with much harsher penalties for banks who don't follow them and customers who don't pay attention.

no matter what humankind invents

/FTFM

TheSelphie: What about Wild ARMs?

GodDAMN that was a great game.

SlothB77: ARMs haven't gone away. they are standard offerings of all major mortgage lenders. just not usually at 3.75%.

Nor are they new. I bought a house 15 years ago with an ARM and I don't think they were new then.

rewind2846: You have got to be sh*ttin' me. Srsly? As I type this, someone in this country is losing their house RIGHT NOW because they did something stupid like take out an ARM to buy what they could not afford

Lots of folks losing their house right now. Lots of folks signed up for more than they could afford. But that has fark-all to do with ARMS - people would be in the same damn boat with a fixed mortgage. ARM's resetting right now are generally NOT making payments rise and if they do, not much. If you bought too much house or lost your job you bought too much house or lost your job - the loan structure doesn't have a rat's ass to do with it at present because rates are really low right now. It COULD cause problems later - I dare say it WILL - rates have to go up. But ARM's themselves are not the problem right now. Also, you are correct to blame people who bought, but you seem to be letting the banks completely off the hook for writing irresponsible loans. banks have a legal fiduciary responsibility to their shareholders to properly vet loan applicants and they abdicated this responsibility - the blame shoudl fall on BOTH parties, but primarily on the banks who did not follow their own rules.

So...

1) ARMs themselves aren't the problem, it's the people who use them, be it lenders, brokers, and borrowers.

2) Repackaging and reselling loans isn't a bad idea by itself, it's the people running the companies which took part in it.

Well - I guess I'm a little sick of hearing what isn't the problem. I tend to agree that ARMs can maybe be useful sometimes. But it's irresponsible to continue to let them exist when the lenders, brokers, and borrowers are improperly incented to misuse or misoffer them. You can't just set up a system with many moving parts, inspect all the parts individually, and conclude that yes all of them are OK if used properly.

ClarkstonCracker: It's the liberal's in congress who believe everybody should be equal, therefor forcing banks to loan to people who suck at life.

rewind2846: If lending institutions are going to make ARMs one of the products they sell, they should treat them like responsible gun owners treat their firearms... locked in a safe and unloaded, with the bullets locked away elsewhere so that children and other irresponsible persons don't get hold of them.

Interesting analogy and I was going to make a similar one. One often hear gun rights supporters (and I support 2nd amendment rights) often say we don't need new laws, we need to enforce existing laws. I totally agree. ARM's aren't the problem - banks granting loans to people they should not have loaned money to in amounts greater than they should have loaned out is the problem. If they had followed their own existing credit guidelines our mess would be much smaller. But when real estate was screaming no one wanted to miss the boat so they greatly relaxed their standards or threw them out the window altogether.

Sweet. Now maybe I can take my negative credit score (thanks to that lying, cheating, whoring ex-wife who also killed the local Beauceant chapter with the explicit consent of the York Rite) and get myself a modest house of my own design. I have no problem with being my own GC and framing contractor. Who know, it might actually happen. I might also crap out a cold fusion reactor.

True story: A mortgage broker we interviewed circa 2006/2007 was recommending that we take out a bigger loan than we would otherwise have wanted, and invest the balance in some financial products he claimed would pay a higher % than our interest rate.

(!)

I didn't ask too much about the financial products themselves - though I think he said the yield was 11% and upwards - because I told him that we weren't interested in increasing our risk in this manner, and I thought it was a bad idea. He actually tried to convince me that it was _lowering_ my risk.

(!)

I was going to mention that he does business out of Los Altos, CA, but it turns out that his website is defunct.

ClarkstonCracker: It's the liberal's in congress who believe everybody should be equal, therefor forcing banks to loan to people who suck at life.

I would say enabling banks to make risky loans, when said risk is then transferred to Fannie or Freddie does not help. Ultimately, the home buyer that looks at the house he really can't afford, but decides he can pay the teaser rate and will figure the rest out later is to blame.

emetib:

1) ARMs themselves aren't the problem, it's the people who use them, be it lenders, brokers, and borrowers.

Absolutely true. An ARM is a perfectly legitimate mortgage product, and frankly an extremely useful one in many cases. Look - what difference does it make whether or not you default on an ARM or a fixed rate mortgage? the answer is none. Frankly I think lots of people say ARM when they mean to say "Interest Only". Two completely different things. ARM's are not a problem in a low rate environment and I don't know why people are focusing on them. They WILL become a problem when rates go up - they just aren't now.


2) Repackaging and reselling loans isn't a bad idea by itself, it's the people running the companies which took part in it.

repackaged credit default swaps are a HUGE problem and we got here because the industry was almost completely unregulated and the ratings agencies were asleep at the wheel. we allowed products to be created which no one understood - they built an economic time bomb that was bound to go off as soon as real estate prices went down and no one told them they couldn't do that. Somewhat akin to a life insurance guy selling a million dollar policy on one person - to a thousand different people but collecting premiums only sufficient to pay ten of them if I actually died. Everything's great when I'm alive and the agent is collecting a premium from a thousand different people - not so great when I die and he has to pay the death benefit but only has 1% of the money he needs. Insurance agents aren't allowed to do that - it's against the law and it's regulated. Credit default swap sellers had no such oversight.

Loreweaver: Wait, are we talking about regular ARM loans, or Ballonn ARM loans?

The former is simply a 20- or 30-year variable-rate loan that fluxuates from year to year, based in part on the Fed interest rate, and on market trends.

The latter is a loan that offers a deep-discount teaser rate, that suddenly balloons to a triple (or even quadruple) the teaser rate after a set amount of time.

And both of them involve one crucial factor - speculation. When you take out either of these loan products, you are speculating that interest rates will be lower at some future time so that you can afford to refinance at a rate you can actually afford. With a fixed rate there are no "what ifs" because you are buying what you can afford according to what you make right now, with only the normal variables that most people have in their financial lives like possible job loss, a high cost illness, and so on.

Speculation is what makes bubbles. Bubbles are bad, except when they are in soda.

What's wrong with ARMs?

We've gotten a 5 or 7 year ARM every time we lived in a house we planned on moving out of. ARMs are a GREAT product, provided you don't go around selling houses to people who are only getting ARMs because they can't afford the payments on a fixed mortgage.

If any of you Farkers are dumb enough to buy one of those things, I know a hot African chick with big tits and $16 million she would like to stash in your bank account.

Falin: What's wrong with ARMs?

We've gotten a 5 or 7 year ARM every time we lived in a house we planned on moving out of. ARMs are a GREAT product

Provided you know your time frame and have some cushion you are precisely who the product is designed for. Again, why pay rates for 30 year money when you're only borrowing for 5 years?

olddinosaur

If any of you Farkers are dumb enough to buy one of those things

there are few things on fark that give me a bigger laugh than your financial advice

By the way I personally have a 30 year fixed at 4.75 because it's the proper product for me and my situation. You people who want to throw out the baby with the bathwater crack me up. It's reactionary and shortsighted. Do you throw away your hammer when you smash your thumb or do you resolve to be careful with the hammer next time?

olddinosaur: If any of you Farkers are dumb enough to buy one of those things, I know a hot African chick with big tits and $16 million she would like to stash in your bank account.

ARMs have saved me a good bit of money over the last 10 years or so.

StandsWithAFist: You forgot to mention how you paid for your car in cash

I paid mine off in less than six months. Close enough?

Hosebeatings: I paid mine off in less than six months. Close enough?

Deadbeat - I paid cash up front.

Arms? Fannie Mae meltdown?? Democrat Barney Frank would like a word:



Link (new window)

olddinosaur: If any of you Farkers are dumb enough to buy one of those things, I know a hot African chick with big tits and $16 million she would like to stash in your bank account.

this is like walking into a sports thread and saying "dude, there is no better quarterback on earth than Michael Jordan" or a comic book thread and saying "the best part about Superman was that he drove that kick ass Batmobile"

i.e., you clearly have absolutely no idea what you're talking about

WaltzingMathilda: olddinosaur: If any of you Farkers are dumb enough to buy one of those things, I know a hot African chick with big tits and $16 million she would like to stash in your bank account.

this is like walking into a sports thread and saying "dude, there is no better quarterback on earth than Michael Jordan" or a comic book thread and saying "the best part about Superman was that he drove that kick ass Batmobile"

i.e., you clearly have absolutely no idea what you're talking about

michael jordan didn't drive the batmobile until season 4, dumbass.

Perhaps it's just time to stop gauging our economy on destructive things (urban sprawl & building houses for people who can't afford them) and work on getting some constructive manufacturing jobs back into this country? I for one would love to see China fall back into its well deserved hell-hole status. Watching wal-marts close would also be a big bonus for the country.

dead_dangler: BabyShaker: I'm sorry, can someone explain just why I shouldn't be proud of being fiscally responsible??

It makes some people feel bad about themselves.

Awesome, clears that up.

Now can you explain why you should be so proud of being fiscally responsible that your need to post it on FARK?

/Reminds me of the Chris Rock skit

I've been a mortgage banker for 23 years.
ARMs are stupid loans.
If you can't afford a fixed rate loan, get a cheaper house, or rent.
They should be illegal.

biffstallion: Arms? Fannie Mae meltdown?? Democrat Barney Frank would like a word:
Link (new window)

I really don't see why certain people want to try and heap this at Frank's feet while ignoring the real criminals in all this mess - banks which lent money to people to buy houses they couldn't afford, and sellers who screwed up the market thinking they could retire on the proceeds of the sale of their house at someone else's expense. No one held guns to these corporate heads to make them loan money for houses which were way overpriced, or to the people who bought houses ten years ago for 25% of what they are trying to scam someone else out of now... they did it because they were greedy and as long as real estate prices went up, they couldn't lose - foreclosure or not.

Some here have said, "Well, Barney Frank and the other democraps changed the law so that these banks could do this" (channeling inner freeper)... but if the laws against murder, rape, child molestation, rape and assault were changed tomorrow, would you wake up monday morning with your machete out and your pants down and stroll to the local schoolyard? Do you refuse to commit certain acts only because there are laws against them? These banks were just waiting to take insane risks for more profit, and once the loopholes in the law were opened, they did just that. Corporations are whores which put profit above all else, even common sense.

The rules were altered so that banks would more easily do business with underserved (due to racism, neglect and other factors) neighborhoods, with the logic that more homeowners can equal lower crime rates, better schools, an expanded tax base, and higher standards of living there. All of this was predicated on a NORMAL housing market, not a bubble.

Instead, the greed of both the banks and the sellers kicked in, and prices shot through the roof as both groups saw the easy money... sellers knew that banks would lend people money to buy their houses no matter how high they jacked up the price, and banks knew that even if the buyer defaulted they would have a property on their books which might sell for twice what they lent the buyer who defaulted. Neither group could lose, or so they thought.

Lawmakers do have their share of the blame, don't get it twisted... regulatory agencies which looked the other way as long as people were making money, lawmakers who didn't call corporations on the carpet as long as the campaign contributions kept coming in, and a general "let business do what it wants" attitude in Washington for most of this decade have resulted in the biggest and most complex economic clusterf*ck in almost 90 years. Frank is just too convenient a whipping boy... but when you're the party of "NO" (No ideas, NO substance, NO plans, NO common sense) I guess you go with what you've got.

WaltzingMathilda: ARMs, in and of themselves, are not bad things. giving them to people who can't afford them is.

Yup. That was the crux of the problem all along: people biting off more than they could chew. The ARM thing just caught a few folks who were right on the borderline. Stupid people do stupid things.

hitlersbrain: Perhaps it's just time to stop gauging our economy on destructive things (urban sprawl & building houses for people who can't afford them) and work on getting some constructive manufacturing jobs back into this country? I for one would love to see China fall back into its well deserved hell-hole status. Watching wal-marts close would also be a big bonus for the country.

So we shoud manufacture parts for houses that aren't going to be built or products that won't be sold to the people best suited to afford them?

What version of dumbass are you anyhow?

That actually a pretty good deal - as long as you're not stretching to get people to qualify. In 7 years you can pay down a lot of principal with the difference between that and a 5.5% fixed. And inflation will have taken care of the difference in payment amounts by that time.

This all assumes, of course, that you're giving this loan to someone with a stable job and at least 2 brain cells to rub together - and has had the ability to save up at least 10% for a down payment + closing costs + buffer fund.

emetib: True story: A mortgage broker we interviewed circa 2006/2007 was recommending that we take out a bigger loan than we would otherwise have wanted, and invest the balance in some financial products he claimed would pay a higher % than our interest rate.

(!)

I didn't ask too much about the financial products themselves - though I think he said the yield was 11% and upwards - because I told him that we weren't interested in increasing our risk in this manner, and I thought it was a bad idea. He actually tried to convince me that it was _lowering_ my risk.

(!)

I was going to mention that he does business out of Los Altos, CA, but it turns out that his website is defunct.

This is exactly why our economy can't have nice things.

There's a lot of talk in this thread about the "blame" due to the purchaser of the adjustable/variable rate mortgage and not nearly enough attention paid to the wolf-like practices of lenders and commissioned brokers, some of whom would do ANYTHING to get that loan shoved down the throat of the buyer who *gasp* has a trusting nature. Spamming "caveat emptor" does not excuse liars and cheats who focus on shafting others under the cover of some novel/popular financial instrument.

I knew a guy who worked at Countrywide for a while and according to him, there was definitely an "at-any-cost" attitude in their mortgage sales depts. Focus was on getting the highest commissions and no-one really cared how they did it. And when I was in college, you should have seen all the credit card companies on campus whose reps KNEW FOR A FACT that most of their marks would overspend and owe tons of fees. Banks have instituted similar fees because it is now PROFITABLE for their customers to have insufficient funds. And then we have Enron and Madoff and the teflon attitude of Goldman Sachs...

It seems that this country is plagued by a willful doublethink that we are all "good" people at heart, but simultaneously that either this constant level of predation either doesn't exist or is actually ALLOWABLE based on blaming the victims ("they deserved it for being so dumb").

A psychologist would likely label this as the mark of sociopathy/psychopathy. We've got a market filled with psychopaths.