Yes, it's official, Americans have lost their minds.
Taking phantom equity out of their homes in cash form, so they can pay bills, go on shopping sprees, or buy cocaine and hookers. Refinancing their home loans to HIGHER interest rate loans. And generally acting like the desperate, in-over-their-heads financial morons that they've collectively become.
Oh, this will end so badly. So, so badly.
Homeowners Refinance for Cash
Nearly nine out of 10 homeowners who refinanced their mortgages in the third quarter took equity out of their homes for cash, the highest rate in 16 years, according to a report from Freddie Mac.
Eighty-nine percent of those refinancing their homes took out loans for at least 5 percent more than their original balances, according to the quarterly review of loans owned by Freddie Mac.
And the borrowers as a group refinanced to loans with higher interest rates than their old mortgages; the difference was the largest since Freddie Mac began compiling the data in 1985.
Analysts said that reflects an economic climate in which homeowners with adjustable-rate mortgages are switching to loans with higher interest rates. Also, the cost of home-improvement loans and home-equity lines of credit have gone up, making cash-out refinancing more attractive.
November 03, 2006
The last desperate days of the over-leveraged American homedebtor. "Barkeep - one more round on the house!"
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16 comments:
hello from germany,
compare this with the refis from 1994 and you see how desperate the borrowers 2006 are.
refinancing freedie mac 1994 vs 2006
http://immobilienblasen.blogspot.com/2006/11/refinancing-freedie-mac-1994-vs-2006.html
Well, technically that's a bit harsh on the majority of homeowners & Americans.
- 30% of homes are owned outright;
- of the remaining 70%, I'd bet half are simply doing the standard P&I paydown. You could argue their average equity as a group will be 50% as they'll be spread along the amortization curve.
So, 35% of homeowners are holding the bag on 75% of the mortgage debt - that's about 25% of the population. Ouch!
That's still a lot of McMillionaires waiting for the hammer to fall.....
Cheers, Haggis
Bagholders hold 75% - smart bagholder. Increase bag o' debt. Ride steppes of Khazakistan with big-ass bag.
Boorat
The over-leveraged clawing and scratching their way to Wal Mart for that last sale item, that last piece of crap made in China. One more purchase to make them feel alive and then back to the "alter of unearned riches". From the share owner society to the share cropper society.
Farm Girl
"homeowners with adjustable-rate mortgages are switching to loans with higher interest rates."
Are they switching from adjustable to fixed-rate mortgages? If so, that would be a key word left out of the above sentence and a positive change if interest rates climb in the furture.
Well, but even Wal-Mart seems now to be beyond their means, see above. If ARM refi's involved a lot of "sweithcing" to higher-interest loans, does that mean some of them went to fixed-rate? It might be smart.
I don't agree that everything plays out according to the script. For instance, we really don't know whether long rates will go up or down. If we did know, we could make a big killing either buying or shorting long bonds.
Has anyone noticed the interest rate plunge going on, rates are down bigtime, my suggestion is you IO/ARM people jump on the wagon quick, cause it is not going to last.
And remember dont be a fool your refinancing to get out of a toxic loan not to borrow more money on a losing assest.
Agin this is hoping that the value is still there..good luck.
borka - that's why I moved a lot of $$$ into a 18 month 5.75% cd - I think rates with deflation and the crash will be coming down, and that's the best i'll get for sometime.
It's only a matter of time borkafatty, before you slip up and give away your identity and location. Then the police will find you and your family slaughtered in your house, money gone, silver gone, gold gone.
You are a perfect example of internet stupidity and if you keep yapping everyday someone is going to figure out were you live, how much money you have stashed, when you go to your part time janitor job, and your all dead. Be careful, brag to no one. It's better to be rich and look poor than to be poor and look rich after tshtf.
Borka, be smart, people die for chump change.
It's only a matter of time borkafatty, before you slip up and give away your identity and location. Then the police will find you and your family slaughtered in your house, money gone, silver gone, gold gone.
You are a perfect example of internet stupidity and if you keep yapping everyday someone is going to figure out were you live, how much money you have stashed, when you go to your part time janitor job, and your all dead. Be careful, brag to no one. It's better to be rich and look poor than to be poor and look rich after tshtf
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Thanks for the advice striker, being a comp junkie since i was 10 (BUILDING MY OWN), dont always beleive what you see to be the obvious, i protect myself, on this intershit thing very well, and trust me I am far from a bling bling, my friggin sneakers i am wearing right now are 2 years old hahah! and besides that i am a cheap batasrd. And agree with you fully, and i am very aware, but thank you indeed for the advice.
Borka,
The rub that is starting to show up and will only increase for alot of those ARM/IO holders in bubble markets is that now that prices are at least 10% off the peak, if they refi, the appraisal will come in at less than their outstanding loan balance, so they will have to come up with cash to give to the bank in order to refi to a fixed loan. So they're basically screwed.
Foreclosures are going to skyrocket next year. It won't be pretty.
cocaine, hookers.....and the problem is?
The problem is... I don't have any!
I shoulda left school in '85 and got into the job market to get my hands on some coke and hookers!
Sh*t! All I can afford is fleabags and meth!
Hey, don't knock fleabags and meth, Clinton didn't!
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