Too true FSD, too True. Current rates on adjustable loans can all to often move DOWN, easing payments for the next 6-12 months. Interesting to think that even with that we still have increasing foreclosure actions.

But lets go back to this time two years ago (ie before the recession started) and see what 12 month LIBOR is.

—–>5.275%. (sept 07)
+2.25 and your rounding 1/8th and we have 7.6%.

Going back to 2002-2004, we see the same 1.3-1.4% LIBOR rates back when FED overnight lending rates were 1% HIGHER, and they hadnt flooded the market buying nearly ever piece of trash paper they could pick up. Or have to bail out the largest insitiutions from their own stupidity with direct infusions of capital, everyone is looking at you citi and BOA.

So rates have hit what seems to be a structeral bottom and can only go up from here, albeit I have a feeling not for atleast another year so the fed can get another bubble going in something.

Too true FSD, too True. Current rates on adjustable loans can all to often move DOWN, easing payments for the next 6-12 months. Interesting to think that even with that we still have increasing foreclosure actions.

But lets go back to this time two years ago (ie before the recession started) and see what 12 month LIBOR is.

—–>5.275%. (sept 07)
+2.25 and your rounding 1/8th and we have 7.6%.

Going back to 2002-2004, we see the same 1.3-1.4% LIBOR rates back when FED overnight lending rates were 1% HIGHER, and they hadnt flooded the market buying nearly ever piece of trash paper they could pick up. Or have to bail out the largest insitiutions from their own stupidity with direct infusions of capital, everyone is looking at you citi and BOA.

So rates have hit what seems to be a structeral bottom and can only go up from here, albeit I have a feeling not for atleast another year so the fed can get another bubble going in something.

Too true FSD, too True. Current rates on adjustable loans can all to often move DOWN, easing payments for the next 6-12 months. Interesting to think that even with that we still have increasing foreclosure actions.

But lets go back to this time two years ago (ie before the recession started) and see what 12 month LIBOR is.

—–>5.275%. (sept 07)
+2.25 and your rounding 1/8th and we have 7.6%.

Going back to 2002-2004, we see the same 1.3-1.4% LIBOR rates back when FED overnight lending rates were 1% HIGHER, and they hadnt flooded the market buying nearly ever piece of trash paper they could pick up. Or have to bail out the largest insitiutions from their own stupidity with direct infusions of capital, everyone is looking at you citi and BOA.

So rates have hit what seems to be a structeral bottom and can only go up from here, albeit I have a feeling not for atleast another year so the fed can get another bubble going in something.

Alot of the people in these loans also have 2nds as part of their 80/20 deal, with the 2nds tied to prime which is also down. My neighbor is in one of these and he says his payments are down almost $700/month and his prop taxes are down over $100/month since his downward modification. Those are some big dollars every month.

I guess if a reset includes going from IO to principle as well then that may change things, but from everything I know many of the 3/1 and 5/1 ARMS that were common in SD were IO for 10 yrs. With rates at loan inception around 5.5%, the 12 month LIBOR would need to climb to 3.25% (assuming a 2.25% margin) just to get back to the initial payment. I think on these loans we are years away from seeing anyone in distress due to rates – may not see anyone in trouble until the IO period runs out and rates are up.

So there are a slew of people that are way upside down now but their payments are shrinking dramatically to the point of possibly being cheaper than renting a comp. So they are sitting and waiting for the end game with these loans while enjoying low payments. These loans are not even on deck yet, they are still in the dugout, hell they may even be still in the parking lot and not even in the stadium yet. They are just another piece of this fiasco that is going to have to play out eventually.

Alot of the people in these loans also have 2nds as part of their 80/20 deal, with the 2nds tied to prime which is also down. My neighbor is in one of these and he says his payments are down almost $700/month and his prop taxes are down over $100/month since his downward modification. Those are some big dollars every month.

I guess if a reset includes going from IO to principle as well then that may change things, but from everything I know many of the 3/1 and 5/1 ARMS that were common in SD were IO for 10 yrs. With rates at loan inception around 5.5%, the 12 month LIBOR would need to climb to 3.25% (assuming a 2.25% margin) just to get back to the initial payment. I think on these loans we are years away from seeing anyone in distress due to rates – may not see anyone in trouble until the IO period runs out and rates are up.

So there are a slew of people that are way upside down now but their payments are shrinking dramatically to the point of possibly being cheaper than renting a comp. So they are sitting and waiting for the end game with these loans while enjoying low payments. These loans are not even on deck yet, they are still in the dugout, hell they may even be still in the parking lot and not even in the stadium yet. They are just another piece of this fiasco that is going to have to play out eventually.