Effect of record low interest rates on Alt-A resets?

[Raybyrnes]

Tha makes sense but my understanding is that if you hit the 7.5 trigger with option 1 of the option arm it triggers a fully amortized payment which can increase the payment by up to 50%.

[DWCAP]

Not less defaults cabal, delayed defaults. You are right that the payments will not adjust to unaffordable levels in 2009 resets at current rates, but in 2010 (according to your year hypothesis) they will be higher than 2009, and maybe 2011 will get nasty as all the money the fed is flooding us with will hit and rates will have to go up to control for inflation. Then they all default in 2011 and are forclosed in 2012 instead of 2009.

Without principal reductions or 10 years of 1% rates these loans are toast. The only questions are when will we fess up to that fact and who takes the hit. (homeowners or taxpayers)

[DWCAP]

Not less defaults cabal, delayed defaults. You are right that the payments will not adjust to unaffordable levels in 2009 resets at current rates, but in 2010 (according to your year hypothesis) they will be higher than 2009, and maybe 2011 will get nasty as all the money the fed is flooding us with will hit and rates will have to go up to control for inflation. Then they all default in 2011 and are forclosed in 2012 instead of 2009.

Without principal reductions or 10 years of 1% rates these loans are toast. The only questions are when will we fess up to that fact and who takes the hit. (homeowners or taxpayers)

[DWCAP]

Not less defaults cabal, delayed defaults. You are right that the payments will not adjust to unaffordable levels in 2009 resets at current rates, but in 2010 (according to your year hypothesis) they will be higher than 2009, and maybe 2011 will get nasty as all the money the fed is flooding us with will hit and rates will have to go up to control for inflation. Then they all default in 2011 and are forclosed in 2012 instead of 2009.

Without principal reductions or 10 years of 1% rates these loans are toast. The only questions are when will we fess up to that fact and who takes the hit. (homeowners or taxpayers)

[DWCAP]

Not less defaults cabal, delayed defaults. You are right that the payments will not adjust to unaffordable levels in 2009 resets at current rates, but in 2010 (according to your year hypothesis) they will be higher than 2009, and maybe 2011 will get nasty as all the money the fed is flooding us with will hit and rates will have to go up to control for inflation. Then they all default in 2011 and are forclosed in 2012 instead of 2009.

Without principal reductions or 10 years of 1% rates these loans are toast. The only questions are when will we fess up to that fact and who takes the hit. (homeowners or taxpayers)

[DWCAP]

Not less defaults cabal, delayed defaults. You are right that the payments will not adjust to unaffordable levels in 2009 resets at current rates, but in 2010 (according to your year hypothesis) they will be higher than 2009, and maybe 2011 will get nasty as all the money the fed is flooding us with will hit and rates will have to go up to control for inflation. Then they all default in 2011 and are forclosed in 2012 instead of 2009.

Without principal reductions or 10 years of 1% rates these loans are toast. The only questions are when will we fess up to that fact and who takes the hit. (homeowners or taxpayers)

[cr]

It depends on the loan. Lower rates will make little or no difference for someone who elected to pay only the interest or less (Negative Amortization) once they have to start paying down principal.

Going from an I/O teaser rate of 1% to even 5% is going to hurt these people.

The only thing that would help is if rates are in fact lower than 5 years ago and they refi into the same loan.

Anyone forced to start paying down principal will be facing a higher payment.

[cr]

It depends on the loan. Lower rates will make little or no difference for someone who elected to pay only the interest or less (Negative Amortization) once they have to start paying down principal.

Going from an I/O teaser rate of 1% to even 5% is going to hurt these people.

The only thing that would help is if rates are in fact lower than 5 years ago and they refi into the same loan.

Anyone forced to start paying down principal will be facing a higher payment.

[cr]

It depends on the loan. Lower rates will make little or no difference for someone who elected to pay only the interest or less (Negative Amortization) once they have to start paying down principal.

Going from an I/O teaser rate of 1% to even 5% is going to hurt these people.

The only thing that would help is if rates are in fact lower than 5 years ago and they refi into the same loan.

Anyone forced to start paying down principal will be facing a higher payment.

[cr]

It depends on the loan. Lower rates will make little or no difference for someone who elected to pay only the interest or less (Negative Amortization) once they have to start paying down principal.

Going from an I/O teaser rate of 1% to even 5% is going to hurt these people.

The only thing that would help is if rates are in fact lower than 5 years ago and they refi into the same loan.

Anyone forced to start paying down principal will be facing a higher payment.

[cr]

It depends on the loan. Lower rates will make little or no difference for someone who elected to pay only the interest or less (Negative Amortization) once they have to start paying down principal.

Going from an I/O teaser rate of 1% to even 5% is going to hurt these people.

The only thing that would help is if rates are in fact lower than 5 years ago and they refi into the same loan.

Anyone forced to start paying down principal will be facing a higher payment.

[jpinpb]

[quote=DWCAP]Basically they are just making you wait longer for your house. [/quote]

I have to agree. I would note, as I posted elsewhere, the forces that be are keeping their word. They said the bubble will not pop. They are letting the air out slooowly. The net result will be the same. The prices have come down and will continue fall, no doubt. But they are dragging this out for a long time.

[jpinpb]

[quote=DWCAP]Basically they are just making you wait longer for your house. [/quote]

I have to agree. I would note, as I posted elsewhere, the forces that be are keeping their word. They said the bubble will not pop. They are letting the air out slooowly. The net result will be the same. The prices have come down and will continue fall, no doubt. But they are dragging this out for a long time.

[jpinpb]

[quote=DWCAP]Basically they are just making you wait longer for your house. [/quote]

I have to agree. I would note, as I posted elsewhere, the forces that be are keeping their word. They said the bubble will not pop. They are letting the air out slooowly. The net result will be the same. The prices have come down and will continue fall, no doubt. But they are dragging this out for a long time.

[jpinpb]

[quote=DWCAP]Basically they are just making you wait longer for your house. [/quote]

I have to agree. I would note, as I posted elsewhere, the forces that be are keeping their word. They said the bubble will not pop. They are letting the air out slooowly. The net result will be the same. The prices have come down and will continue fall, no doubt. But they are dragging this out for a long time.

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