Yes, us Piggs already knew about Alt-A and option ARMs and certainly Mr. Mortgage gave us the heads up, as well.
But for mainstream media to come out and announce it, gave new light.
I thought 60 minutes was great and the only problem I had w/it is that it did not fully explain the option ARMS.
From what I understand, you can choose to pay less than the actual monthly payment and whatever is left over that is due that you don’t pay is then tacked on to the actual loan amount.
So, if this is right, say you bought a 600k house and your payments, hypothetically, are 4k a month, but you’re only paying 2k a month, the remaining 2k is added to the loan amount of 600k.
This was attractive and not a concern for many, well, b/c real estate always appreciates.
So after 2 years of only paying 2k a month, means, quick math, almost 50k added to your loan of 600k.
Now to add insult to injury, your 600k house has lost, minimum 20% value. Now worth 480k, but you owe 650k and your loan has reset.
Double-whammy. Yeah. This is not going to end well.
