October 23, 2006

MSM mocking bubble city homedebtors as lenders take shills to the cleaners with interest only loan stupidity

20 comments:

Anonymous said...

think how many couples watching that video have interest only loans, and the dinner conversation afterwards

Neverwas said...

I had no idea that the market was still "white-hot!" Who'd'a thunkit?!

Salt Lake Mortgage Guy said...

That's a great video, a bit old, but still good at explaining that type of loan.

However, it failed to mention door #3 out of an I/O loan - refinancing.

Not every home has gone down in value and appraisers treat refinance appraisals a bit differently than purchase appraisals.

How can you finance a home that's decreased in value? Borrow more than it's worth. Lenders will loan up to 125% of a home's value to borrowers with good credit.

Anonymous said...

Did the video ignore the fact that the loan amount increases because the bank adds the principle you don't pay onto the loan?

Anonymous said...

The most halarious thing about the video is that they tell you "come to ABC.com for more information before you buy..."

Haven't these TV stations shown themselves to be disloyal to the consumer by selling them out and having real estate shrills on air?

Salt Lake Mortgage Guy said...

Anon,

That's an option ARM, a different beast altogether. A regular interest only ARM goes for a period of time, say 10 years and then larger payments become due to offset the I/O period.

Almost everyone refinances into a better loan before it resets to this higher payment.

honica jewinski said...

Salt Lake, Come on man, who the hell even talks about 125's anymore. Just get the "appraiser" to treat it like a refi appraisal like you were saying.

borkafatty said...

think how many couples watching that video have interest only loans, and the dinner conversation afterwards

--------

For real, must be like crickets chirping, on top of the

"Why didn't you listin to me" speech.

Shakster said...

LooKs like a bit of ABC CYA 2ME

Anonymous said...

ABC News is doing the public a service. They do rip a new hole in those real estate sharks.

People don't loan you money for your benefit. Duh!

Anonymous said...

Have you ALL forgotten that:

SUZANNE RESEARCHED THIS!!!!

Stop worrying about it!

:-)

Paul E. Math said...

Refinancing doesn't really solve anything though, does it? The reason these people took the I/O or Option Arm is because they couldn't afford even a 3/1 ARM, much less a 30 year fixed. So how will they afford the new higher monthly payment of a fixed after they refi? Sure, some may tighten their belt-buckles and scrape by. But many can't. Especially when you factor in the fees associated with refinancing.

I just don't see refinancing as a magic-bullet panacea to cure all the over-leveraged, underfinanced mortgages.

Anonymous said...

I think the lenders and borrowers both bit off more than they can chew. The lenders are screwed because they wont want to refinance, but then they are stuck with people going into foreclosure. So what do they do? They are screwed. THey won't want to make any new loans while the old loans will be screwing them over.

And what about Mortgage Backed Securities? Sounds like some pensions, retirements could be taking a hit. This economy is in the crapper. Kiss your retirement good bye. There will be no social security.

Chris G said...

For those who want to know, the animation piece was put together by a guy named Todd who runs the oddtodd.com website. He started his website after he got laid off in New York shortly after 9/11, and started making short animated skits that were based on his life without a job. He has become somewhat of a cult figure for those dot-commers who lost their jobs in the 2000 crash.

And paul e. math, thanks for stating what everyone here should have stated about salt lake mortgage guy's comment. This is part of the same line of bull from lenders that got these buyers in trouble in the first place. There are a lot of I/O's and option ARMs out there, they cannot be ignored.

Even if you have a standard ARM that will reset, moving to a fixed-rate mortgage before the reset will almost always cost more per month. I got a 5/1 ARM back in 2004 at 4.375%. If I get a 30-year fixed at today's rates, I will be paying at least $300 extra a month. That's $300 a month I can't spend on something else. For some people, $300 a month puts them over the edge.

And ANYONE who suggests that getting a loan at 125% of the value of their home is a good idea needs to get their head examined. That is horrible, horrible advice.

Salt Lake Mortgage Guy said...

Chris,

If your choice is lose your house, or refinance at 125%, what are you going to do?

I don't think 125s are a good idea either, but it is an option.

NYC_COP said...

Did anyone in NY see the NBC coverage of the Housing Bubble tonight (10-23). I saw the ad for it but missed it. How was it? Thanks.

Anonymous said...

"If your choice is lose your house, or refinance at 125%, what are you going to do?

I don't think 125s are a good idea either, but it is an option."

"your" house??? How much of that house is yours, if you owe more than it's worth? At that point, you're pretty much just borrowing it from the bank until you make good on the debt you generated. Stumble, and your status as a house borrower disappears too.

tabasco jenkins said...

salt lake,

"If your choice is lose your house, or refinance at 125%, what are you going to do?"

Me, I'd stop digging.

Unfortunately, that isn't the American way, so there will be more digging, and as a result, more graves.

FlyingMonkeyWarrior said...

That cartoon guy in the blue shirt with the blank look on his face lives in Phoenix, AZ.

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