08-25-2007, 12:53 PM
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Banned
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Join Date: Nov 2003
Location: Middle Of Nowhere,
USA
Cobra Make, Engine: ERA 428 FE 4-speed CR "TL" heavy spline
Posts: 3,907
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Quote:
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Originally Posted by 4RE KLR
CDC
yes that is true a lot of people bought homes they could not afford. But if the FED lowers rates they will still have those homes, and it will only put of the inevitable. Or will it?
What it would do is give these people time to get the mortgages refinanced and into a fixed rate loan.
I really don't think the Fed rate has that much to do with it any longer. It is just being used as an excuse. The mortgages are written to "adjust" maybe someone should tell them that could also mean down and NOT just up.
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A FED rate decrease will not do much for homeowners, for example a decrease of 100 BPS (1%), which isn't likely to happen, may impact variable rate mortgages by the same number, 1%, but there are $2 trillion dollars in sub-prime loans that will be adjusted to market rates within the next 14 months - $2 trillion dollars. A lot of these loans are now at 2-4% and market rate for sub-prime loans is in the 8-13% range - a huge incease in monthly payments will result. Plus, a lot of new homeowners apparently didn't realize that property tax, especially in CA in 1% every year - not just the first year. In addition, in CA a lot of new homeowners elected to relocate to the Central Valley and commute to the coast - 125-200 miles each way - think of the cost of gas!
With that said, I do wonder about the people that are directly involved in this mess - are they stupid, were they duped by mortgage brokers, did they lie on their mortgage application, did the mortgage broker prompt them to lie, were the lender standards relazed, big time - or a combination of all the above. All I can say is - we cannot bail these people out - we all must pay for our stupidity and mistakes in life.
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