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ARMpits


Atrios writes, hopefully, that the rise in problems with ARMs will "just be anecdotes and not an epidemic. . . ." He links to this story in McPaper about husband and wife in their late 70s now looking for work because they "refinanced their home two years ago to pay off some bills."

When they refinanced, they did so with an ARM, adjustable rate mortgage. I'm not willing to call these folks stupid for a couple of reasons: one they're elderly and just weren't in the loop on all the debt innovations during the late 90s, early 00s; two, they were probably suckered into the ARM, after a fashion, by "a quick fix" to their debt problems. Of course the debt problems arose out of spending obligations created during the stock bubble of the 90s. In the end, they had to find some way to keep up their standard of living, right?

Here's an interesting bullet point from the article:

The number of borrowers in trouble will rise this year and peak in 2007 and 2008 as the largest number of mortgages reset to higher rates, according to First American Real Estate Solutions, a real estate data provider.

In 2007 and 2008? Democrats, are you listening?

This is the madness that Alan "the Bubble" Greenspan hath wrought. 25% of all mortgages are ARMs, says USAToday, or about 10 million mortages.

Atrios is wrong: this is only the tip of the iceberg.


Sean Paul Kelley April 3, 2006 - 3:30pm
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according to these

statistics dated 03/29/2006::

The adjustable-rate mortgage (ARM) share of activity increased to 28.7 percent of total applications from 28.3 percent the previous week.

More people are taking ARM mortgages out! They could lose their shirts when the payments rise. I did watch a programme a couple of nights ago where a couple lost their home. Their payment tripled.

Credit that is too easy to get and terms that are too generous, have a way of penalizing borrowers, sometimes drastically. Seniors are particularily vulnerable. There isn't much prospect of them getting a job that will enable them to get it back or one like it. They're at the end of their earning power and there aren't many employers who will hire a senior.

I'm not familiar enough with American procedures to know if these seniors can make a complaint that they were duped because they didn't understand the terms. First place I'd advise them to go is to a reputable bank where they can get advice about how to proceed.

canuck April 3, 2006 - 5:06pm
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I got out

I bought my house back in 2001 and had a 1 year ARM. It started out at 5.25%, but then dropped for a few years. However, it started picking up and eventually got back to where I started. I decided that I should get the hell out of that ARM now and refi'd late last year. I ended up at 6.25%, but since the house didn't cost that much to begin with, it's still an easy monthly pament. I got out when the getting got good and I was able to kill my credit card debt in the process. Color me lucky.

monkey knife fight April 3, 2006 - 6:06pm
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Yep, good move

I love Sean-Paul's allusion to debt "products". I think they're unethical as hell, but what passes for U.S. capitalism these days is merely the means of separating wage earners from their wages as expeditiously as possible. None of us can pay cash for a house, but neither do we need to pay 400% of its value over the life of a mortgage.

I have a few friends who are into their second (maybe third? I dunno) mortgage. That scares the bejesus out of me. I don't want to have to work just until I'm seventy-five just to pay a damned bank back, thanks!


- Rick
"Free your mind, and your ass will follow" - George Clinton

Rick April 3, 2006 - 9:23pm
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Tear up the credit cards or pay the balance every month

so there is no interest charge. And don't carry cards from stores like Sears. They charge 28.74% interest rates on their Premium Cards and then they add exorbitant late fees. Third party cards charge outrageous interest fees. I believe everyone now does have to inform cardholders what their annual interest rate is...used to be they could suck people in by just stating their monthly rates...2% doesn't sound like much does it?

canuck April 3, 2006 - 10:32pm
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You really have to be vigilant about this

stuff, especially when the stores try to suck you in with "discounts" if you open a credit card account at the point of purchase. The supposed discount is illusory if you don't pay the balance on a month to month basis.

Mark April 3, 2006 - 10:39pm
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Also, it hits your credit rating.

We got a copy of our credit report when we applied for a mortgage last year. Although we're on-time payers and had no credit balances, we were dinged for having applied for credit too frequently in the past two years. Although we did obtain approval on the mortgage, I later spent a day on the phone closing out accounts from various retailers with whom we had said "oh, fine" when they invited us to open a store charge account for the "specials".

We are back to one bank card each, balance paid off every month.


- Rick
"Free your mind, and your ass will follow" - George Clinton

Rick April 4, 2006 - 8:39am
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Read this about

a stated monthly rate of 2%. Monthly rate converted.

Math was never my strong suite, but how does 2% month convert into 26.8%? Something about effective rate? They use different terms to confuse the borrower. In my simple mind, 2%x12=24%...doesn't work out that way???

canuck April 3, 2006 - 10:44pm
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