Wild Markets, The Fed, and Opportunities

Uncertainty in Financial Markets Could Cause Dramatic Rise in Existing ARMs at Next Adjustment
If you or anyone you know has an Adjustable Rate Mortgage, this is an important point to consider. Many ARM loans are tied to the London Interbank Offered Rate (LIBOR). In fact, there are six million loans in the United States that use LIBOR to determine the interest rate and as the name suggests, many banks use this rate to lend money to each other.

But, today, banks lack confidence that the money they lend will be paid back. In light of what has happened with Lehman Brothers, IndyMac Bank and others, as well as AIG, banks are requiring much higher rates on LIBOR to offset the added risk.

The Federal Reserve Left Rates Unchanged but...
The Federal Reserve met yesterday leaving the target rate unchanged at 2.00% but just like LIBOR the actual rate being charged by banks to each other is closer to 6.00%. This again suggests that those with ARM loans should consider a refinance into historically low fixed rates.

What Happened?
Financial companies have been under attack. IndyMac was the largest bank to falter in twenty years. What brought IndyMac down was their exposure to defaulting loans. This sapped investor confidence and drove down the stock price until they filed for bankruptcy.

Following IndyMac, we saw Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch succumb and were either forced into conservatorship, to close their doors, or to sell themselves. AIG, the world's largest insurance company was also impacted, forced to make a deal with the U.S. government to stay in business.

 
Posted by Sam Sams on 09/18/2008 08:46 AM   Comments (3)   Mortgage Changes in the ActiveRain Channel  
Generate short URL
Post is included in group: Agents who want REFERRALS!
Post is included in group: All About Mortgages/Mortgage Networking
Post is included in group: All Thing's Texas
Post is included in group: Coldwell Banker Group
Post is included in group: Collin County, TX Real Estate Professionals

3 Comments on Things are changing!

SEP
18
2008
168,393 Points 1 Featured Post

People are going to get very familiar with LIBOR is the spread doesn't come back to historical norms quickly.  They are simply not going to understand how 'interest rates' are down but their adjustable mortgage went up.

 
8:53am • #1
117,982 Points

This is something that needs to be addressed by the powers that be.  Most folks with an adjustable rate mortgage can't get an appraisal that will accomplish a refinance right now.
9:08am • #2
518,534 Points Outside Blog Attended Rain Camp

All of this boggles the mind, I have been working with many clients, who have gone into foreclosure, who have told me they tried to stay in their homes, they tried to work with the banks, but they banks would not work with them, it would seem to make more sense to keep people paying on their mortgages, even if you have to rework the loan than it would to let it go to foreclosure.....
10:42am • #3


What does the graphic say?
Leave a response…

(optional)
Spam Prevention:
 

Sam Sams

Richardson, TX

More about me…

Address: Merit, Texas, 75458

Office Phone: (444) 256-4442

Cell Phone: (222) 222-2222

Email Me



Links

Archives

RSS 2.0 Feed for this blog