Big Blitz Posted May 17, 2022 Posted May 17, 2022 Nope - it's all different and gooder this time! A kind of mortgage that helped cause the housing crash is surging in popularity. Here's why it's different this time (hahaha) A mortgage product that helped trigger the 2008 housing crash is becoming popular again— but this time it's different. Adjustable-rate mortgages — also known as ARMs — are home loans with an interest rate that adjusts over time depending on the fluctuation of market rates. They're less predictable than fixed-mortgages as they tend to change periodically and are considered risky as borrowers run the chance of paying much higher mortgage payments than they may have originally budgeted. Adjustable rate mortgages aren't inherently bad but the large share of borrowers during the last cycle with these loans caused problems," Ali Wolf, the chief economist for Zonda, a homebuilding prop tech company, told Insider. "During the mid-2000s housing boom, roughly 35% of all mortgages were adjustable rate. This meant that when interest rates reset, there were a lot of homeowners unable to service their new monthly mortgage payment." In the Covid-19 housing market, (of course!) ARMs have regained momentum as the Federal Reserve's rate hikes put upward pressure on mortgage rates. According to the Mortgage Bankers Association, applications for ARMs have now reached the highest level since 2008 – a fourteen-year high – and are expected to continue rising. "More borrowers continue to utilize ARMs to combat higher rates," Joel Kan, MBA's associate vice president of economic and industry forecasting, said in a statement, adding that the share of ARMs has increased to 11% of overall loans. This growth has some people worried as ARMs played a key role in the 2008 housing crash. In the period that led up to the implosion, many subprime lenders enticed borrowers with interest-only ARMs that initially sported low rates. When rates began to soar, it created an affordability crisis that pushed many borrowers into foreclosure. Although ARMs reemergence is causing whiplash — there's no need to fret in 2022. Lending standards have tightened and that means today's borrowers aren't walking through a financial minefield. "The mortgage market has shifted dramatically since 2008," Jude Landis, vice president of single-family risk management at Fannie Mae, said in a statement. "Improvements in underwriting, technology, and quality controls – some visible, some less so – have resulted in a fundamentally sounder mortgage system than before the crisis of 2008." https://www.businessinsider.com/adjustable-rate-mortgages-helped-trigger-housing-crash-not-this-time-2022-5 It doesn't matter that they'll all be retired wealthy and dead when we feel the true fallout from the inevitable creep that this will create in 10, maybe 15 years. The market us different now! You'll be able to sell that home you're currently grossly overpaying for rn in a few years when your rate rockets to 15 percent no problem! And if not hey, we're going to remove all the laws and regulations regarding single family homes in our neighborhoods so you can just let your cousins, siblings, or friends all split the mortgage. It's going to be great. 1 1
Gene Frenkle Posted May 17, 2022 Posted May 17, 2022 Wall Street was never punished for what they did in 2008, in fact it was mostly rewarded for its crimes via massive bailouts. They've been doing the same crap using different instruments ever since. They whole thing is a house of cards waiting for a stiff breeze to send it crashing down. The current bubble dwarfs the .com bubble and 2008 combined. 2 1
Tenhigh Posted May 17, 2022 Posted May 17, 2022 (edited) 1 hour ago, Gene Frenkle said: Wall Street was never punished for what they did in 2008, in fact it was mostly rewarded for its crimes via massive bailouts. They've been doing the same crap using different instruments ever since. They whole thing is a house of cards waiting for a stiff breeze to send it crashing down. The current bubble dwarfs the .com bubble and 2008 combined. I don't think that you really understand the 2008 crash. Edited May 18, 2022 by Tenhigh 3 1
Precision Posted May 18, 2022 Posted May 18, 2022 Ahhh.....the Big Short part 2! I wonder if they have restarted the NINJA loans? Love the scene in the strip club and the stripper that has multiple properties. One of my reports and his girlfriend are looking for a house in MA/NH area. Combined income of $160K and looking at $500K houses. They both graduated last spring so I can't believe they a lot to put down and could even be approved for such a large sum with their limited credit history. Side note, houses here are going for nearly 20% over ask!
Over 29 years of fanhood Posted May 18, 2022 Posted May 18, 2022 1 hour ago, Tenhigh said: I don't think that you really understand the 2008 crash. Was it over when the Germans bombed Pearl harbor?? 1 1
Over 29 years of fanhood Posted May 18, 2022 Posted May 18, 2022 The reality is the amount of risky subprime debt out there now isn’t the same at 2008. It’s not even close. Housing price increases have thus far been driven up by flights from cities, accelerated moves in the fear cheap interest loans are almost over and massive unprecedented inflation. Now, if the government forces or subsidizes lenders into loaning money to increasingly bad credit risk profiles as the rates climb, in order to hide the realities of what all of the poor economic and monetary policy is doing to the housing market and economy, then we are likely to see 2008 again. but it’s not that or like that right now.
PetermansRedemption Posted May 18, 2022 Posted May 18, 2022 Why would anyone ever take this type of loan? It’s literally gambling. IMO it isn’t a very good gamble either. I think it’s far more likely interest rates keep rising than going back to 3%. I’d rather lock in at 5%, know what I have, and then refinance if rates drop. Come to think of it, why wouldn’t people just do that versus taking an ARM mortgage? 12 hours ago, Precision said: Ahhh.....the Big Short part 2! I wonder if they have restarted the NINJA loans? Love the scene in the strip club and the stripper that has multiple properties. One of my reports and his girlfriend are looking for a house in MA/NH area. Combined income of $160K and looking at $500K houses. They both graduated last spring so I can't believe they a lot to put down and could even be approved for such a large sum with their limited credit history. Side note, houses here are going for nearly 20% over ask! WNY area is no better. At least it wasn’t last year. 20-25% over ask was the norm for any decent property. 1
Gene Frenkle Posted May 18, 2022 Posted May 18, 2022 18 hours ago, Tenhigh said: I don't think that you really understand the 2008 crash. I understand it quite well, thank you.
Gene Frenkle Posted May 18, 2022 Posted May 18, 2022 CDO is the new MBS. ARMs rising makes for riskier CDOs. House of cards. 1
Over 29 years of fanhood Posted May 18, 2022 Posted May 18, 2022 (edited) 4 hours ago, Gene Frenkle said: CDO is the new MBS. ARMs rising makes for riskier CDOs. House of cards. New? In a human evolution sense new?? CDOs have been around for 20 years 23 hours ago, Tenhigh said: I don't think that you really understand the 2008 crash. Another case and point. Very few people even understand the narratives they were being fed about 2008 from the respective political masters much less the actual chain of events that led to the whole thing. Edited May 18, 2022 by Over 29 years of fanhood 1
Tenhigh Posted May 18, 2022 Posted May 18, 2022 5 hours ago, Gene Frenkle said: I understand it quite well, thank you. Please then, Mr. Frenkle, enlighten us.
US Egg Posted May 18, 2022 Posted May 18, 2022 (edited) The LW narrative is it’s Trump’s fault for skyrocketing housing prices. ……and skyrocketing gas prices, car part shortages, baby formula and food shortages. Not to mention drug shortages and CT scan dye shortages (yes, the drug and dye shortages are real issues at hospitals, my wife has had a return of a health issue that required very recent hospital visits and that’s where we learned of it.) The other LW narrative is China is still mad at Trump over his blaming China for Covid and they’re getting back at the U.S. Even perennial Leftie adored Golden boy Evon Musk sees the Dem finger pointing and excuse making as hollow and lame for what is going on with the rampant and very recent instability in the U.S. Edited May 18, 2022 by I am the egg man 1
Precision Posted May 19, 2022 Posted May 19, 2022 (edited) My brother and sister-in-law sold their previous house and have been looking since January. He's a schoolteacher and she's a college professor, they live in the Southern Tier. They can't find a decent home in their price range. I'm not sure they are top earners but with their combined income I would have thought they could find something. Median home selling price in NH for April 2022.......$440K. 11 hours ago, PetermansRedemption said: Why would anyone ever take this type of loan? It’s literally gambling. IMO it isn’t a very good gamble either. I think it’s far more likely interest rates keep rising than going back to 3%. I’d rather lock in at 5%, know what I have, and then refinance if rates drop. Come to think of it, why wouldn’t people just do that versus taking an ARM mortgage? WNY area is no better. At least it wasn’t last year. 20-25% over ask was the norm for any decent property. Edited May 19, 2022 by Precision
Gene Frenkle Posted May 19, 2022 Posted May 19, 2022 4 hours ago, Over 29 years of fanhood said: New? In a human evolution sense new?? CDOs have been around for 20 years Another case and point. Very few people even understand the narratives they were being fed about 2008 from the respective political masters much less the actual chain of events that led to the whole thing. MBS had been around since the 70's, but wasn't a problem until 2008. I have no political masters. 4 hours ago, I am the egg man said: The LW narrative is it’s Trump’s fault for skyrocketing housing prices. ……and skyrocketing gas prices, car part shortages, baby formula and food shortages. Not to mention drug shortages and CT scan dye shortages (yes, the drug and dye shortages are real issues at hospitals, my wife has had a return of a health issue that required very recent hospital visits and that’s where we learned of it.) The other LW narrative is China is still mad at Trump over his blaming China for Covid and they’re getting back at the U.S. Even perennial Leftie adored Golden boy Evon Musk sees the Dem finger pointing and excuse making as hollow and lame for what is going on with the rampant and very recent instability in the U.S. It's WALL STREET'S fault. They have a lot more right wing donors, but they're hardly a slave to either party. The rest of your comment is too dumb to respond to. 3 hours ago, Precision said: My brother and sister-in-law sold their previous house and have been looking since January. He's a schoolteacher and she's a college professor, they live in the Southern Tier. They can't find a decent home in their price range. I'm not sure they are top earners but with their combined income I would have thought they could find something. Median home selling price in NH for April 2022.......$440K. Tell them to wait a minute. It all comes around.
Over 29 years of fanhood Posted May 19, 2022 Posted May 19, 2022 (edited) 27 minutes ago, Gene Frenkle said: MBS had been around since the 70's, but wasn't a problem until 2008. I have no political masters. Interesting tidbit, CDO would have been novel in the 70s and in new 2000, but not today. Business school grad circa 78? Edited May 19, 2022 by Over 29 years of fanhood
US Egg Posted May 19, 2022 Posted May 19, 2022 13 hours ago, Gene Frenkle said: It’s WALL STREET'S fault. They have a lot more right wing donors, but they're hardly a slave to either party. The rest of your comment is too dumb to respond to. Age old antiquated blame the RW wealthy for the country’s woes. The wealth that has flourished for the LW from Billionaires in the last 20-30 years is still deemed a myth to those of the outdated narrow minded “it’s all on the RW wealth” despisers. 1
Big Blitz Posted May 20, 2022 Author Posted May 20, 2022 Who knew? How could this be possible? More U.S. subprime borrowers are missing loan payments Consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards, a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end. The share of subprime credit cards and personal loans that are at least 60 days late is rising faster than normal, according to credit-reporting firm Equifax _. In March, those delinquencies rose month over month for the eighth time in a row, nearing their prepandemic levels. Delinquencies on subprime car loans and leases hit an all-time high in February, based on Equifax’s tracking that goes back to 2007. Many people, including those with less-than-perfect credit, paid off debts and built up savings during the pandemic, a surprising outcome considering that lenders at first thought borrowers would default en masse when Covid-19 hit. The government’s response, including stimulus payments and child tax credits, boosted many families’ financial health. https://on.mktw.net/3sMwRwp All SELF INFLICTED BY BRANCH COVIDIOTS Existing home sales fell in April to the lowest level since the start of the pandemic Sales of previously owned homes in April fell to the lowest pace since the Covid pandemic started, according to the National Association of Realtors. “We are moving back to pre-pandemic sales activity, but I expect further declines,” said Lawrence Yun, chief economist for the group. Tight supply kept home prices higher, despite rising interest rates. The median price of an existing home sold in April was $391,200, the highest on record and an increase of 14.8% from a year ago. https://www.cnbc.com/2022/05/19/existing-home-sales-fell-in-april-to-lowest-level-since-start-of-pandemic.html But it's different this time! You vote for these people, you're officially mentally ill.
Tenhigh Posted May 20, 2022 Posted May 20, 2022 On 5/18/2022 at 11:51 PM, Gene Frenkle said: MBS had been around since the 70's, but wasn't a problem until 2008. I have no political masters. It's WALL STREET'S fault. They have a lot more right wing donors, but they're hardly a slave to either party. The rest of your comment is too dumb to respond to. Tell them to wait a minute. It all comes around. Please, Gene, tell us about how it was all Wall Street's fault, those greedy fat cats. 1
Big Blitz Posted June 22, 2022 Author Posted June 22, 2022 (edited) Demand for adjustable-rate mortgages surges, as interest rates make biggest jump in 13 years Mortgage applications to purchase a home rose 8% last week compared with the previous week, bolstered in part by demand for adjustable-rate mortgages, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications were, however, 10% lower than they were in the same week one year ago. A big jump in mortgage rates may have actually spurred homebuyer demand, perhaps as consumers worried rates would move even higher. Mortgage rates surged to the highest level since 2008, while making their biggest one-week jump last week in 13 years. Adjustable-rate mortgages offer lower interest rates and can generally be fixed for terms of five, seven or 10 years. While these loans are considered riskier, because they have the potential to adjust to higher or lower rates, they are underwritten much more strictly than they were during the last housing boom more than a decade ago that eventually led to an epic housing crash. https://www.cnbc.com/2022/06/22/demand-for-adjustable-rate-mortgages-surges-as-interest-rates-jump.html It's different this time! Edited June 22, 2022 by Big Blitz
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