The guy working on my website is on vacation for 2 weeks, as his wife is having a baby, but I will have all that on there, as well as plenty of graphs.
There has been an ongoing debate between me and some others about the affordability of ARMs. Some say that ARMs are used by plenty of folks just to manage their cash flow, while I am guessing that the great majority of ARMs are affordability solutions, and when they reset, those borrowers will face foreclosure.
I came across this yesterday from the FDIC website:
“Why is 30 percent of the mortgage market still booking into adjustable-rate mortgages? Because we believe they couldn’t otherwise afford to squeeze themselves into a home or they’re squeezing themselves into a more expensive home for affordability factors.”
This is a very good point: at historic low interest rates, why wouldn’t every borrower secure a fixed rate mortgage at 5%? Why get an adjustable at 3% or 4%, knowing it will keep going up, and could well end up over 7%,8%, 9%? Because they can’t afford the darn house at 5%, that’s why!
Fannie Mae reported that 88% of refis last year were at a higher interest rates. Americans are so desperate to get the cash from their homes, that they are willing to refinance at a *higher interest rate*. The only time my husband and I ever refinanced, was to get a lower interest rate on a 15 year or 30 year fixed rate mortgage. Refinancing into a higher interest rate, to me, shows the borrower is seriously strapped. 88% of conventional loan refis in this country were at a higher interest rate. That is a shocking statement.
I also prefer that we change the name “housing ATM” into “housing credit card” or “housing line of credit”. Mortgage equity withdrawal is debt. ATM is a term for money that is saved, not for a line of credit.
