Prime rate mortgage is the better rates (lower), fixed.
Arms are adjustable rates, you may get it at 3% at first but then it goes up after a year or 2.
that’s what is killing the housing market right now.
They say it could last a couple of years and you could loose all equity in your home, if you had any to begin with. not really sure why they call it Subprime
------------------ Technology is great when it works, and one big pain in the ass when it doesn't. Detroit iron rules all the rest are just toys.
Prime rate mortgage is the better rates (lower), fixed.
Arms are adjustable rates, you may get it at 3% at first but then it goes up after a year or 2.
that’s what is killing the housing market right now.
They say it could last a couple of years and you could loose all equity in your home, if you had any to begin with. not really sure why they call it Subprime
The banks are giving loans to borrowers that are below the "prime" credit rating. Hence they are "Subprime" lenders and borrowers.
* Industry term used to describe credit and loan products that have less than stringent lending and underwriting terms and conditions. As a result of the higher risk, subprime products charge a higher rate of interest. www.amdreammortgage.com/glossary.php
[This message has been edited by OKflyboy (edited 03-06-2008).]
Does that mean banks gave loans to 'at risk' borrowers (and/or) borrowers bought mortgages they couldn't afford long term?
(Bear with me folks---I've been in an information vacum for 18 months--very little TV-no iternet-a one horse town with a once/week newspaper that is more about local events than news)
Does that mean banks gave loans to 'at risk' borrowers (and/or) borrowers bought mortgages they couldn't afford long term?
(Bear with me folks---I've been in an information vacum for 18 months--very little TV-no iternet-a one horse town with a once/week newspaper that is more about local events than news)
Sounds like home, here.
We get a news paper twice a week, and dial up.
Hey don’t knock it Don, you really ain’t missed much.
Subprime is being used to refer to any number of bad mortgages give out. They are typically ARMs given to people with little credit history or who are unable to qualify for a regular mortgage. Technically it's just a rate that's below the current prime rate - typically a teaser for the first few years that adjusts up to prime or more after 1 - 5 years. Now that the subprime rates are adjusting up from the 3%-5% they had when they could barely afford the payments to around 7%-8%, their payments have gone up more than they can afford - so they default.
Both borrowers and lenders are to blame. The borrowers gave these crappy mortgages to people they knew couldn't afford them. Or worse yet, some of them didn't even require verification of credit history. And the buyers were too stupid/greedy to stop themselves from buying a mortgage with a $1500/mo payment when they make $1200/mo.
From another thread, here's a great explanation of the whole thing. It's available as either a Power Point presentation or an Acrobat PDF.
quote
Originally posted by Marvin McInnis:
From inside the investment community: Subprime Primer (2.4 MB PowerPoint [PPS] file)
This is the most complete but succinct summary of the current problem that I have seen. If I could credit the author of this brilliant piece, I would. All I know is that it came to me by way of some very wealthy people.
Does that mean banks gave loans to 'at risk' borrowers (and/or) borrowers bought mortgages they couldn't afford long term?
(Bear with me folks---I've been in an information vacum for 18 months--very little TV-no iternet-a one horse town with a once/week newspaper that is more about local events than news)
Does that mean banks gave loans to 'at risk' borrowers (and/or) borrowers bought mortgages they couldn't afford long term?
(Bear with me folks---I've been in an information vacum for 18 months--very little TV-no iternet-a one horse town with a once/week newspaper that is more about local events than news)
That's exactly what it means.
Many bought homes with "5 years interest only" loans when they could barely afford the "interest only" payment, now, 5 years later, they have to start making payments that include both interest AND principle and suddenly they're rethinking their purchases.
That IS disturbing. I guess the next question is how many lending institutions may fail because of it? That loaned money came from somewhere...........
A subprime rate is like a teaser to get a person in a house that really can't afford it. There's a whole slew of these loans out there. ARM's, balloon payments, my favorite is the interst only loan. All you do is pay the interest but never any money towards the house. Kind of like leasing a car, you get to drive it but never own it.
I think the practice is questionable but really its the buyer who is reponsible. It doesn't take a genius to figure out that if you make $10 per hour that you can't afford a $300K house. That's the problem with a lot of people right now. They want it all, the big house, the nice cars, the flat screen tv, etc. Problem is if you make 30k a year you can't afford all that crap. Its pretty simple, you either make more money or get by with less. I saw this mess coming 10 years ago. Its not that people can't afford to won their own home, they just all can't have that nice house on the hill.
Does that mean banks gave loans to 'at risk' borrowers (and/or) borrowers bought mortgages they couldn't afford long term?
(Bear with me folks---I've been in an information vacum for 18 months--very little TV-no iternet-a one horse town with a once/week newspaper that is more about local events than news)
The adjustable rate is the key, the mortgage rate is not fixed at (or around) the prime intrest rate. Some are financing with 0% down, and a low rate to begin with. Basicaly just covering intrest. 5 years down the line the intrest rate goes up as does the payment. Guess what the borrower has no equity, he's only been paying intrest for 5 years. All of a sudden his payment goes from something they could barley afford, to almost double what they can afford.
------------------ Ol' Paint, 88 Base coupe auto. Turning white on top, like owner. Leaks a little, like owner. Doesn't smoke....... OK, we're trying to quit.
That IS disturbing. I guess the next question is how many lending institutions may fail because of it? That loaned money came from somewhere...........
Potentially, quite a few. Countrywide Mortgage, the nation's largest lender, has already lost so much money that they effectively went bankrupt, until Bank of America bought them.
The FDIC identified 76 banks at risk in the fourth quarter, 2007. Remember, FDIC is who insures your deposits. They're even increasing their staff to handle the potential swell of bank failures: http://www.consumeraffairs....8/02/fdic_banks.html
The worldbank is now recommending lenders forgive a good percentage of these home loans. For example, Greenspan says that if a person has a 400,000 mortage, the bank could reduce his principal owing to 200,000 and cut his payments in half. He says if they don't consider bailing out these individuals, the country risks going even further into a recession. Over on the housingpanic blogs there are a number of people of there who say they made a good chunk of change flipping houses, and have since been sitting on their earnings from selling these properties. Now they are withholding payments on their own mortgages, saying they are hopeful the government will pay off their expensive house so they don't have to use their own money to do so. It's sickening. All these assholes who borrowed more than they can afford should reap what they so. It's not going to be pretty, but it will be the only way to bring some sanity back to the housing market prices.
Potentially, quite a few. Countrywide Mortgage, the nation's largest lender, has already lost so much money that they effectively went bankrupt, until Bank of America bought them.
The FDIC identified 76 banks at risk in the fourth quarter, 2007. Remember, FDIC is who insures your deposits. They're even increasing their staff to handle the potential swell of bank failures: http://www.consumeraffairs....8/02/fdic_banks.html
For some reason, the page wouldn't load properly for me. What were the top 10 "at risk" banks?
The worldbank is now recommending lenders forgive a good percentage of these home loans. For example, Greenspan says that if a person has a 400,000 mortage, the bank could reduce his principal owing to 200,000 and cut his payments in half.
That is insane--but at least the bank will get a portion of their depositers' money back. There are no winners in mass foreclosures---who is going to buy these thousands & thousands of homes? You can't even insure a vacant home, and being vacnt, the value will drop like a rock in a matter of months.What a mess.
That is insane--but at least the bank will get a portion of their depositers' money back. There are no winners in mass foreclosures---who is going to buy these thousands & thousands of homes? You can't even insure a vacant home, and being vacnt, the value will drop like a rock in a matter of months.What a mess.
True, but if you are sitting on a pile of money and looking to invest this could be a good thing. The stock market is in bad shape right now. If you find a nice home in a good neighborhood you could purchase it, rent it out to the people who just defaulted on their loan, and sell the house for a profit when the market picks back up.
That would freakin suck. I am still going to try, I have a few more years until that happens.
Let's just hope that the government doesn't try to do anything stupid, like bail out the mortgage lenders, investment groups, and the people who are foreclosing on their homes, when they should just let everything happen and do nothing.
If a bail out happens and the bill allows people to claim bankruptcy on their homes, the interest and qualifications for new home owners will skyrocket.
That is insane--but at least the bank will get a portion of their depositers' money back. There are no winners in mass foreclosures---who is going to buy these thousands & thousands of homes? You can't even insure a vacant home, and being vacnt, the value will drop like a rock in a matter of months.What a mess.
Some subdivisions of $500k-$1M homes sit almost completely empty in some cities - falling into disrepair. Most unsold. Others the owners walked away when they defaulted and owed more on the mortgage than their falling home value.
The FDIC article didn't list specific bank names.
What really sucks for a lot of people are renters who's landlords have defaulted. They pay their rent on time every month, and then out of the blue they get evicted.
Let's just hope that the government doesn't try to do anything stupid, like bail out the mortgage lenders, investment groups, and the people who are foreclosing on their homes, when they should just let everything happen and do nothing.
If a bail out happens and the bill allows people to claim bankruptcy on their homes, the interest and qualifications for new home owners will skyrocket.
Yea thats true. That would make it extremely hard to get a loan. It was very hard for me to get a loan on my 02 GTP, then I wrecked it and paid the loan off. This country is only hurting itself with greed. It won't be too long when this entire country will be on its knees.
[This message has been edited by craigsfiero2007 (edited 03-07-2008).]
The thing that alot of people don't hear about are the little people who got stuck and are still trying to dig out. Take me and my family. We bought our house in suburban St. Louis 3 years ago. We had 4 children at the time and a 2 bedroom apartment. We have crappy credit mostly due to medical bills but people we started talking to said "no problem" We knew what an ARM is and what could happen but it was our only option. We had 2 yrs fixed with a 2 yr prepayment penalty, so, we could'nt re-fi until the fixed rate was up. Fast forward two years, we have 5 children the bubble bursts so our house that appraised for 110k in '05 won't appraise for 80k now and nobody will touch us because we don't have good credit. so here we sit. I work 2 jobs,almost 80 hrs a week, my mortgage went from $890 to 1250 a month and we're stuck. The bank won't work with us so we'll see what happens........
The thing that alot of people don't hear about are the little people who got stuck and are still trying to dig out. Take me and my family. We bought our house in suburban St. Louis 3 years ago. We had 4 children at the time and a 2 bedroom apartment. We have crappy credit mostly due to medical bills but people we started talking to said "no problem" We knew what an ARM is and what could happen but it was our only option. We had 2 yrs fixed with a 2 yr prepayment penalty, so, we could'nt re-fi until the fixed rate was up. Fast forward two years, we have 5 children the bubble bursts so our house that appraised for 110k in '05 won't appraise for 80k now and nobody will touch us because we don't have good credit. so here we sit. I work 2 jobs,almost 80 hrs a week, my mortgage went from $890 to 1250 a month and we're stuck. The bank won't work with us so we'll see what happens........
-T
I know there are stories MUCH worse than mine
Ok but you knew what you were getting into. You knew that the rates would go up. Why do you have 5 kids? Why don't you have better credit? I'm not trying to be rude but you brought this situation upon yourself. I honestly wish you the best but I can't feel sorry for your situation.
Let's just hope that the government doesn't try to do anything stupid, like bail out the mortgage lenders, investment groups, and the people who are foreclosing on their homes, when they should just let everything happen and do nothing.
If a bail out happens and the bill allows people to claim bankruptcy on their homes, the interest and qualifications for new home owners will skyrocket.
You're so right man........especially when your neighbors start to lose their houses and then investors buy them and start moving in renters......or better yet they just sit there vacant, until windows get broken and boards go up. It's great for every taxpayer. Think of all the empty properties to invest in for young Saudi oil barons or companies with Chinese money. I'm sure you can't wait for Wichita to look like Detroit..........I hope they don't do anything either (tounge firmly in cheek)
Ok but you knew what you were getting into. You knew that the rates would go up. Why do you have 5 kids? Why don't you have better credit? I'm not trying to be rude but you brought this situation upon yourself. I honestly wish you the best but I can't feel sorry for your situation.
Jeremy
I never asked for you to feel sorry for me. I just want people to know that not everybody that got into this did it to keep up with the Joneses. Hell I dont even have cable (or a Fiero)
The thing that alot of people don't hear about are the little people who got stuck and are still trying to dig out. Take me and my family. We bought our house in suburban St. Louis 3 years ago. We had 4 children at the time and a 2 bedroom apartment. We have crappy credit mostly due to medical bills but people we started talking to said "no problem" We knew what an ARM is and what could happen but it was our only option. We had 2 yrs fixed with a 2 yr prepayment penalty, so, we could'nt re-fi until the fixed rate was up. Fast forward two years, we have 5 children the bubble bursts so our house that appraised for 110k in '05 won't appraise for 80k now and nobody will touch us because we don't have good credit. so here we sit. I work 2 jobs,almost 80 hrs a week, my mortgage went from $890 to 1250 a month and we're stuck. The bank won't work with us so we'll see what happens........
-T
I know there are stories MUCH worse than mine
I'm trying to find compassion here, but I just can't. I'll refrain from being a complete ******* and won't call you an idiot, but.........
How was it your only option? You couldn't find a 3 bedroom house to rent?
Why would you have 4 and then 5 kids if you really couldn't afford them in the first place? Hey I can see one and then an Oops! But 5 kids????
You knew you probably couldn't afford it in a couple years and you still took out the loan? (Hello!!!!! Like telling a kid the stove is hot and they still have to put their finger on it and get burned.)
Nope. I think my Give-A-Damn is busted.
Fire away with a negative at me but after that, think hard about the points I brought up and ask yourself...."Was that my only choice?" You had a domino effect of poor choices.
Listening to talk radio today, I heard of a plan that is being circulated around the Senate. It won't help everyone but, it might help some. The crutch of the plan is tax credits being made available to anyone that buys a home in foreclosure. I believe they said that the buyer had to stay or keep the home a minimum of three years to get the whole tax credit. Though it doesn't really save anyone that used ARM's and now can't make the payments, it does keep the market moving and keeps homes occupied. I don't think there is a good answer to this. I'm definately not in favor of another Savings and Loan Bail Out. We're still paying for that mess. Some banks are going to fail, that's part of doing business. Hopefully, folks will learn from this and not bite off more than they can chew. Even if the full meal doesn't come along for three to five years. If you can't afford it now, what's makes folks think they will in a few years.
Originally posted by aceman: Why would you have 4 and then 5 kids if you really couldn't afford them in the first place? Hey I can see one and then an Oops! But 5 kids???.
Dude, I'm going to guess that reading wasn't your best subject in school, but, I fail to see ANYWHERE in my post that I said I couldn't afford my kids. I could have 2 and the $300+ a month would still be a bite in the a$$. Again, I never asked for help or sympathy especially from a douchebag like yourself..........
You're so right man........especially when your neighbors start to lose their houses and then investors buy them and start moving in renters......or better yet they just sit there vacant, until windows get broken and boards go up. It's great for every taxpayer. Think of all the empty properties to invest in for young Saudi oil barons or companies with Chinese money. I'm sure you can't wait for Wichita to look like Detroit..........I hope they don't do anything either (tounge firmly in cheek)
PS Wichita do you own a house??
-T
It's not going to happen here. Our local economy is strong, we don't have inflated house prices and never did (one of the most affordable in the nation for a large city), and yes I own a home. Locked rate and affordable.
I've been saying this would happen for years. Just do a search of my posts a couple of years ago. Many said I was acting like chicken little... but it looks like I was right.
People were paying way too much for houses a couple of years ago. As unfortunate as it is for people who bought homes that they could not afford, it is beneficial to our economy to see these prices come back down to sane, proper levels.
I don't want to point my finger at anyone, but two people are at fault here:
1) The people who were buying a home that was 2-3x more the price they could actually afford. 2) The lenders for loaning out the money.
Who's going to lose out in this? The same people that caused it. That is, unless the government does a bail out, then everyone gets to foot the bill.
*edit* Wow, I just read the whole thread and it looks like this has been said already... by everyone, lol
[This message has been edited by Spektrum-87GT (edited 03-07-2008).]
Dude, I'm going to guess that reading wasn't your best subject in school, but, I fail to see ANYWHERE in my post that I said I couldn't afford my kids. I could have 2 and the $300+ a month would still be a bite in the a$$. Again, I never asked for help or sympathy especially from a douchebag like yourself..........
-T
You needed to buy a house WHY? Could it be because you needed more room and more BEDROOMS. Need larger house=more money. If you didn't have 5 kids, you wouldn't need a larger house. You could AFFORD a smaller living accommodations like a 2 bedroom house or apartment. Sorry, you're just digging a deeper hole.
So why did you need to buy a large house? Why did you need to get into a loan that jacked up $300-400 more a month? Those 4-5 kids had nothing to do with that.
You said poor credit...... 5 kids won't put someone to living paycheck to paycheck and robbing from Peter to pay Paul.
And, I will be an ass-hole now......... YOU ARE A PROVEN IDIOT THAT LACKS ANY COMMON SENSE. It is evident and proven in one simple post.
just telling a story that's different than the ones you hear in the news......
Ok= he got his 5 kids the same way I got my 4, and everyone else got theirs. Puckhead, since you are personally involved-give me your take on what you would like to see happen. I'm guessing you are already working as many hrs as possible, and the wife can't leave 5 young ones with a babysitter to go to work.
If you are mature enough to have a large family and buy a home, you are informed enough to know that the money the bank gave you to buy the home wasn't actually theirs--it belonged to the people who had accounts there--people like me-your neighbors and friends. People who invested in the bank. Ordinary people. They are the ones who will get hurt when banks start failing.
What would you like to see the bank do? Cut the monthly payments/intrest and lengthen the term of the loan? Would that work in your case?
Ok= he got his 5 kids the same way I got my 4, and everyone else got theirs. Puckhead, since you are personally involved-give me your take on what you would like to see happen. I'm guessing you are already working as many hrs as possible, and the wife can't leave 5 young ones with a babysitter to go to work.
If you are mature enough to have a large family and buy a home, you are informed enough to know that the money the bank gave you to buy the home wasn't actually theirs--it belonged to the people who had accounts there--people like me-your neighbors and friends. People who invested in the bank. Ordinary people. They are the ones who will get hurt when banks start failing.
What would you like to see the bank do? Cut the monthly payments/intrest and lengthen the term of the loan? Would that work in your case?
We're trying to re-fi through NACA (if you've got time naca.com is an interesting read) it's ALOT of meetings and paperwork but we started and we'll see where it leads (5.25% @30yrs fixed would be nice). As far as what I'd like to see happen, I would like to see more people get the benefits of a NACA style re-fi.......I don't have a clue,I work, hang with the family whenever possible drink a beer before bed, surf a bit and then start it all over again tomorrow. I'm certainly no economist.
Originally posted by Wichita: It's not going to happen here. Our local economy is strong, we don't have inflated house prices and never did (one of the most affordable in the nation for a large city), and yes I own a home. Locked rate and affordable.
We didn't get stupid here.
May your good fortune continue, my man. Housing around here didn't get stupid really either (avg 5-7% a year) although mine appraised for 110k I got it for 100k but with the foreclosures nothing's selling and it's hurting everybody here. Again good luck man Kansas is God's country. My brother-in-law lives in Overland Park (works for Garmin)
