24 January 2009

Haven't Seen Much Discussion

Of the fact that all the ARMs that people were worried about and making fun of as obvious disasters in the making for home owners on a tight budget are resetting lower, saving mortgage-holders a lot of money.


Corpulent Raider said...

It's wonderful that rates have come down for ARM-holders, just as it's great that gas prices have fallen and stabilized at 63% down from the peak (at least in my area).

BUT, both gas prices and ARM rates have fallen for negative reasons - essentially, it's great FOR THE SURVIVORS, those who still have jobs.

Additionally, even if people are getting some relief from the cost of carrying the mortgage, the problem still exists: the homes typically cannot be refinanced, because of a combination of lower market values for the houses and now-excluded credit scores and histories for the borrowers.

Therefore, although we somewhat dodged the ARM bullet on the way down, we've merely moved the day of reckoning from while the economy's on the way down to when it begins to rise again, and rates increase.

A net gain, no denying, and probably the best outcome that could reasonably have been hoped for, but it's no panacea.

Harry Eagar said...

Hey, your ARM just reset down! Look! Look!

(Sneaks banks insolvent by close to $3 trillion through alley while you're looking at the waving ARM.)

Cheering low ARMs is like telling a patient with advanced pancreatic cancer to be glad that his nails are perfectly manicured.

Harry Eagar said...

Or maybe this is why.

Nut graf: 'The resets inflict more trauma on the U.S. housing market. The average option ARM monthly payment will soar 63 percent -- or $1,052. Although there was a slight increase in home sales in November, prices fell 18 percent from a year earlier, according to the S&P/Case-Shiller Index.'

Harry Eagar said...

Or this:

'The share of Alt-A mortgages underlying bonds at least 60 days late, in foreclosure or already turned into seized properties climbed 1.53 percentage points last month to 22.88 percent, JPMorgan said. Defaults on so-called option ARMs rose 2.47 percentage points to 30.96 percent, the report said.'