A Call To uh, No ARMS ....Are ARMS really the devil incarnate?

Carol, these people signed a legal contract and I would have to think that the government can't just come along and do away with it without some compensation involved, which would mean taxpayers would end up paying the bill.

As far as the economy goes, I do not have the exact figures, but I would venture to say that if you would take all the foreclosures as a percentage of all the loans not in foreclosure, that percentage would be extremely small.  The problem is that people are looking at the foreclosures as a percentage of increase over a previous year, and of course that is going to sound like the whole industry is going to pot. I do not know of one Borrower that I did a loan on in lets say the past three years that has gone into foreclosure. I say the past three because those seem to be the years that are taking the most heat for what is going on. Maybe this is because I write loans by the book and do not lie about incomes or bend the rules, but I believe that the majority of the Loan Officers are more like me than the few that lie and take advantage of people.  Yes we should not be so cold hearted as to not be concerned for people who might lose their homes, and we should try to help them within reason, but we should not be made to pay for their mistake. They need to take responsibility for what they did. 

I am dealing with someone right now that is going way over her head to purchase a Condo.  I have told her this and keep on putting the mortgage payments in front of her, but she does not want to hear.  She wants the Condo at any cost.  If she gets the loan, this will probably be my first foreclosure.  But if she comes up with the money to do it, and meets the guidelines, we have to give her the loan or face a law suit for discrimination.  After advising her not to do this, should we also be made to pay later for her lack of common sense?

OK preaching over, I need to know when to shut-up ..... LOL 

Honestly & Personally....I'll have to look into the moratorium more to make a valid case on whether I think it will give the public the second chance they often seek and deserve.  Time is the only teller....

Carole - I will look over the moratorium more in depth and give you my opinion, for what it is worth.

Carole:

Like Maureen, my ARM will readjust in March. We knew full well what we were getting into, as I expect many others did. I am not sure a moratorium is the right answer. Will it just delay the inevitable? It seems to me that adjusting the mortgage limits on conforming mortgages is one better solution. There may be others that a mortgage neophyte like me is not creative enough to think of. I am interested to see what others have to say.

Jeff

Carole, I was on a role ...... LOL

When the Subprime Companies that we deal with were still coming in to our office, they claimed that 85% of all Borrowers who take out a Subprime Loans stay in a Subprime Loans.  Subprime Loans are usually 2 -3 year ARMS, so that means to me that 85% of the people do not clean up their credit in that time period.  Not because they can't but because they usually continue their bad spending habits.  This moratorium might buy them a little more time but IF these figures and patterns are correct then all that it will accomplish is to forestall the inevitable, in my opinion of course :) 

OK I am done ......LOL 

Well, like many others, I re-fied several years ago. I could have had a 4% ARM. But I'm "old school" and opted for a 5-1/8% for a 30-yr fixed. I'm real glad that given today's market, I don't have to worry about my pmt increasing. AND I didn't take any equity out of my home at that time to buy a new car or furniture, etc. So I've got lots of equity and payments lower than rent. I made my decisions ... and others made their decisions. We all had our choices!

The thing I wonder about the people that "may" get bailed out is will they all of a sudden become responsible at managing their money? Often when people take out equity loans to pay off the credit cards, they don't stop charging. They just take on more debt. Wonder if they'll do the same thing with any "savior" programs. Will these programs end up being a temporary fix if the people don't change their ways?

I DO feel sorry for them, but it was their decision.

Heavens, I take too long to respond and Elaine's already planning her own funeral. =) 

I have empathy for the people who find themselves in this situation, I really do.  But every single client I've ever served who did an ARM was informed by the lender of what the payment would be in year 1, year 2, year 3 and they went in with eyes wide open.  I know that a lot of folks ignored that information but that's their own fault. 

The ones who are begging for a moratorium...are they going to change their personal situations now and over the next two years so they can pick up at that point?  No, they're not.  George is right that statistics show clearly that the folks who have bad credit have bad credit habits and don't get that cleanup accomplished. 

If it's going to happen, then mandatory financial counseling is a great idea-but then, you can lead a horse to water...

My opinion is this-and it sounds mean but so be it-let the chips fall where they may and we can clean up the mess sooner rather than later.  A moratorium simply means that you'll be in worse shape in 2 years than if the bottom falls out right now.

I love posts and threads that make me think!!

Carole- Very thought provoking post..  I know there are people who were sold a bill of goods by some unscrupulous lenders and agents.. but I don't think that's the majority.  I think the problem is that most buyers just don't get what can happen with an ARM.. especially one with neg amortization.  They all think they are smarter then the lenders.. it's like playing the slots in Vegas.. the cards are stacked against you but everyone wants to believe they will beat the house... 

 Smart guys with good financial grounding use ARMS as a tool that they understand and manage.. it's Joe and Jane , who don't understand these loans and should never have gotten them, that wind up losing their homes.  If you are in a job where you income is stable and will not go up by more then a  cost of living increase an ARM will always work against you.

Carole: What a great blog post title and picture! The 'Moratorium' thing is bizarre. I'm not sure it would work and how legal it would be.

Part of me thinks it would save a lot of people - and the mortgage company that doesn't want more REO. The other part of me thinks, Will it make any difference? I've tried to help folks bring up their credit, but it's just too tempting to buy a new truck instead. That's why credit history is still the best predictor of future payments being made or not.

I'm not the person who blames the mortgage industry, either. Yes I'm in it. But yes, I have an ARM, too. I'm a consumer like the rest of 'em.

Great subject.

I could be wrong, but I think the words/comment ratio on this topic is unusually high. Well done inspiring this level of feedback from your folks.

And wait till you see my new boat, and iPhone, and cabinets, and....