50 point cut

[CarlsbadMtnBiker]

Thanks HLS,

When you wrote (4 times): FED FUND RATE and PRIME RATE HAVE NOTHING TO DO WITH MORTGAGE RATES OR ARM RATES

I was simply disputing that exact statement to the letter.
Rebuttal required as your post was screaming it fairly loudly. You and others like FormerSD have provided the needed clarification to close the gap between us .. somewhat.

CMB … aka.. Buy and hold Baby !!

[HLS]

COOP,,
Depending on what amount you are looking for, most popular way is COINS.
You want to buy bullion, coins or gold stocks ?

Popular coins are:
American Gold Eagles
South African Krugerrands
Buffalo Gold Coins
Mexican 50 Pesos Gold Coins
Hungarian 100 Korona Gold Coins
Austrian 100 Corona Gold Coins
Austrian Philharmonic Gold Coins
Australian Kangaroos Gold Coins
Canadian Gold Maple Leaf Coins
There are China Panda coins also

There is a small premium on the coins when you buy, but you get the premium back when you sell to someone honest.

One of the most popular is still the South African Krug’s.
The price today is around $735 to buy and they would pay you $725. Other coins have different premiums/spreads.

The spreads are usually larger on coins under 1 ounce.
The coins weigh a bit over an ounce, but they have an ounce of gold in them.

Coin business is competitive, but an honest dealer works on volume and low margin.
Larger cities with more dealers should be more competitive. Some dealers will work on a $5 per coin spread, esp in volume.

If you need help, I know a wholesale guy in OC.

As far as Greenspan, I don’t blame him directly for the housing bubble. I think that it was brilliant lowering rates to keep us from going into a depression after 9-11.
The real problem was allowing 100% Financing on mortgages with wasn’t his department.

Quite simply, low rates that we had coupled with a 10% minimum down payment requirement would have responsible people in homes today with payments that they could afford at market levels probably at 50% of what they were in 2005, and no ARM crisis.

Low rates WERE the answer, the problem is they screwed up the question!

[bsrsharma]

Since nobody mentioned anything bad about the cut…

The Canadian $ is close to touching US 99 cents today (after the cut). I guess this may be the week when it crosses over. I think that will be an interesting moment. I remember when the Candian $ went down sharply, a lot of businesses in Washington State stopped accepting Canadian $ (at par, as they were doing before). We may see a reverse this time (in Canada) – US $ no longer accepted here!

[CarlsbadMtnBiker]

coin … coin … coin … coin … my precious..my precious

remember the hobbit? I loved that movie. no, maybe it was ring .. ring .. ring .. ring. awww crap .. never mind.

[hipmatt]

According to bankrate…http://www.bankrate.com/brm/default.asp
most mortgage rates are higher today than last week.. and I tend to agree with HLS that the fed funds rate will mainly impact HELOCs, arms, and credit card debt… I doubt it this rate cut will have much help for the RE industry and the builders, even though their shares are up..

BTW, for those who said a rate cut would HELP the USD.. I guess you were wrong. The us dollar index at 79.17 is the lowest I’ve ever seen it.

I suppose that if you are gonna use an arm loan, and you don’t need food, you don’t buy any goods, and you don’t drive, then the rate cut may have helped you buy a bit more house than before.

[HLS]

Will someone who has an ARM PLEASE get out your loan docs and post what your index and margin are.
Then post what your current rate is and what your next reset cap is.

I’d like to find someone who is going to actually benefit the way some of you think.

We will see what the 1 year LIBOR does in the next few days.
Some people have margins that are 3-6% OVER the index.
Their reset rate is STILL BELOW THIS.

I think another thing that you might not realize is that some indexes are lagging averages, and slow moving indexes, and are not going to change 50 bps anytime soon.

There are some assumptions being made about ARMS that just aren’t true.

ANYBODY ??

[CarlsbadMtnBiker]

“Will someone who has an ARM PLEASE get out your loan docs and post what your index and margin are.
Then post what your current rate is and what your next reset cap is.

I’d like to find someone who is going to actually benefit the way some of you think.

We will see what the 1 year LIBOR does in the next few days.
Some people have margins that are 3-6% OVER the index.
Their reset rate is STILL BELOW THIS.

I think another thing that you might not realize is that some indexes are lagging averages, and slow moving indexes, and are not going to change 50 bps anytime soon.

There are some assumptions being made about ARMS that just aren’t true.

ANYBODY ??”

Good Post HLS.. let’s see some live and real examples of this. I know many are tied to a 12 month rolling average of the index, so it is slow moving. I am also curious to see how many margins are over 3% ..ouch !!

I have no loan products that fall into this category to post though ..sorry.

[HLS]

What many people do not know about an ARM is that the larger your margin is, the more your “loan salesperson” earned in commission. Margin is never zero at PAR, but there can be a wide spread.

The NEG AM loans are the worst piece of crap loan ever invented for the borrower. (Best EVER for the lender)
A 5% MARGIN is possible. They pay the highest commissions in the industry, which is the ONLY reason that many people have them and owe more on their loan today than they started with.
They were lied to about that low,low payment.

Simply put, the lender rewards the “loan salesperson” for screwing the borrower. The worse the screw job, the higher commission gets paid. People have no idea.

I’ve seen many crazy loans that people are in because they went to a friend, neighbor, relative, etc. for a “free” loan.

I always tell people my fee, and give them an option of how it gets paid. I’m not looking to pocket a penny that they aren’t told about.

I’ve seen FREE cost people thousands of dollars. With friends like that, who need enemies ???

[carlover]

My 5 year arm which doesn’t reset until September, 2010 is based on the 1 year treasury CMT plus 2.75%. The current rate is 4.625%, and the adjustment caps are 2% annually and 5% lifetime. So the cap on my rate increase in September, 2010 would be 6.625%. If 1 year treasuries hold where they are today (around 4%) then it doesn’t make a difference because that would give me a rate of 4+2.75 = 6.75% which is higher than the cap of 6.625%.

This is only one example so please don’t try to extend this to the entire rest of the market. Saying the interest rate cut will make no difference is a bit of a stretch as it will still allow a lot of buyers to refinance into a fixed rate product. But there are a lot of people underwater, or soon to be and things could get ugly because they won’t have the option to refinance.

[cr]

So if this cut directly has no benefit to homeowners facing foreclosure, and very limited benefits to those who may see a fraction lower payment on say a HELOC or a maxed out credit or 5, then who does this cut benefit? In other words, sure there may be some corrupt elite at the top winning out, but how do they justify the logic for a cut?

The obvious answer is it makes money cheaper to borrow, but that money inevitably has to be paid back, and that’s the whole problem with the housing industry right now. So… again, what good does throwing more liquidity in the form of cheaper debt really do?

The “system” is a joke.

[kev374]

It has been documented that rate cuts do not trickle down to the average consumer credit card. The credit card companies just get better margins so they are the ones that benefit.

Also, instead of trying to SOLVE the problem of printing money, excessive borrowing and spending in this country these fools in the Fed are just encouraging spending but at what cost?

The dollar is going to be worthless pretty soon but it’s okay because this rate cut is for the big wigs to rake in some more dough while the stupid asses that are the American public buys more stuff on credit and drives themselves to financial ruin. But then again the government may turn socialist like in countries like Belgium, take from those who work hard and give to the bums who spend recklessly!

This country is officially headed for the toilet! Our forefathers would be ashamed!

[CarlsbadMtnBiker]

“The dollar is going to be worthless pretty soon but it’s okay because this rate cut is for the big wigs to rake in some more dough while the stupid asses that are the American public buys more stuff on credit and drives themselves to financial ruin. But then again the government may turn socialist like in countries like Belgium, take from those who work hard and give to the bums who spend recklessly!”

stupid asses, .. bums .. e.g. American Public. humm…..you are casting a pretty big net there Kev..

Why are you so bitter?

[mgubnyc1]

Kev is Right! Probably because the American dollar and the Canadian dollar are par! Our goverment is trying to bail out billions in risky mortgages so there bank buddies don’t lose. This sucks and its only going to get worse.
Isn’t this what Japan tried to do 10 or 12 years ago when there realestate crashed, didn’t they reduce there rates to 0 but still had no effect!
What would have happened if they had raised rates?
I would raise rates in the USA, I would rather have a strong dollar then a temporary jump in the stock market.

[equalizer]

I checked out Eloan for last few years. they are among low cost, so terms are probably not robbery like most brokers. Read terms carefully. 300K loan for SFH in CA, 800FICO:

30 Year Fixed (30 year loan)
Interest Rate Points MonthlyPayment APR
6.250% 0.564% $1,847 6.344%

5 Year ARM (30 year loan, fixed for 5 years)

Interest Rate Points MonthlyPayment APR Margin
7.125% 1.901% $2,021 7.291% 2.750%

Life Cap 12.125%
Index Type One Year Treasury Bill
Current Index Value 4.230%
Margin 2.750%
Periodic Cap 2.000% per 12 months
First Adjustment 60 month(s)
First Adjustment Cap 5.000% (READ THIS!!!!!!!!!!!!)

At the end of the 60 month(s), the rate will adjust to the lower of:
1. The index plus the margin of 2.750%,
2. The previous rate plus 5.000%, or
3. The life cap of 12.125%.

the 1 year CMT has dropped from 5% to almost 4% today
so anybody resetting today would have a rate of 6.75%, not 5 or 6% becuase of the first adjustment cap of 5%. well 6.75% is a heck of a lot better than 7.75% rate in Jan 07, but resetting wont stop the foreclosures, just slow the pain for marginals.

[equalizer]

ETRADE loan results

Similar to above except 5yr ARM rate/margin is lower.

Interest Rate Points MonthlyPayment APR Margin
6.125 % 1.000 $ 1822.84 7.250 % 2.25
Interest Rate Change Caps: First – 5%, Periodic – 2%, Lifetime – 5%
1-year LIBOR index plus the margin.

for 3 yr ARM, Interest Rate Change Caps: First – 2%, Periodic – 2%, Lifetime – 6%

SO, it looks like the first adjustment for most 5 yr ARMS is more likely 5% cap, not 2% cap!!

[Author]

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