Why Borrowers May Not Benefit From Rate Cut

[(former)FormerSanDiegan]

DaCounselor – Thanks for the info. There has been much hay made with respect to the mortgage reset chart. Many of the resets for sub-prime as well as Alt-a and prime that occurred in 2006 and 2007 were huge jumps, and the resulting jumps in foreclosures are influenced by those in concert with declining prices.

Many have speculated that the second wave of loan resets coming in the next 12 months will be worse than the effect of the resets thus far. However, people need to consider the potential that many alt-A and prime borrowers with loan resets in 2008-2009 will not be hit nearly as hard as the sub-prime folks circa 2006.

[HLS]

Not sure what other banks did, but as far as WAMU HELOCS are concerned, the Fed funds rate cut that took effect on Sept 10th was not reflected to borrowers until Nov. 1st, affecting the Dec payment.

Also,Many subprime ARM loans have margins of 5% or higher.
Many resets could be based on a 12 month average rate which is figured 45 days before a loan resets. They do not simply use the lower current index on the day of adjustment.

Many people will still have large jumps in payment that will not be affordable. Most people cannot tell you what their index & margin even is, and what their payment will go up to if it is less than the max jump, which is often 2pts, and converts to an amortized payment rather than interest only.

A 40% increase in payment is not unusual.

[HLS]

Not sure what other banks did, but as far as WAMU HELOCS are concerned, the Fed funds rate cut that took effect on Sept 10th was not reflected to borrowers until Nov. 1st, affecting the Dec payment.

Also,Many subprime ARM loans have margins of 5% or higher.
Many resets could be based on a 12 month average rate which is figured 45 days before a loan resets. They do not simply use the lower current index on the day of adjustment.

Many people will still have large jumps in payment that will not be affordable. Most people cannot tell you what their index & margin even is, and what their payment will go up to if it is less than the max jump, which is often 2pts, and converts to an amortized payment rather than interest only.

A 40% increase in payment is not unusual.

[HLS]

Not sure what other banks did, but as far as WAMU HELOCS are concerned, the Fed funds rate cut that took effect on Sept 10th was not reflected to borrowers until Nov. 1st, affecting the Dec payment.

Also,Many subprime ARM loans have margins of 5% or higher.
Many resets could be based on a 12 month average rate which is figured 45 days before a loan resets. They do not simply use the lower current index on the day of adjustment.

Many people will still have large jumps in payment that will not be affordable. Most people cannot tell you what their index & margin even is, and what their payment will go up to if it is less than the max jump, which is often 2pts, and converts to an amortized payment rather than interest only.

A 40% increase in payment is not unusual.

[HLS]

Not sure what other banks did, but as far as WAMU HELOCS are concerned, the Fed funds rate cut that took effect on Sept 10th was not reflected to borrowers until Nov. 1st, affecting the Dec payment.

Also,Many subprime ARM loans have margins of 5% or higher.
Many resets could be based on a 12 month average rate which is figured 45 days before a loan resets. They do not simply use the lower current index on the day of adjustment.

Many people will still have large jumps in payment that will not be affordable. Most people cannot tell you what their index & margin even is, and what their payment will go up to if it is less than the max jump, which is often 2pts, and converts to an amortized payment rather than interest only.

A 40% increase in payment is not unusual.

[HLS]

Not sure what other banks did, but as far as WAMU HELOCS are concerned, the Fed funds rate cut that took effect on Sept 10th was not reflected to borrowers until Nov. 1st, affecting the Dec payment.

Also,Many subprime ARM loans have margins of 5% or higher.
Many resets could be based on a 12 month average rate which is figured 45 days before a loan resets. They do not simply use the lower current index on the day of adjustment.

Many people will still have large jumps in payment that will not be affordable. Most people cannot tell you what their index & margin even is, and what their payment will go up to if it is less than the max jump, which is often 2pts, and converts to an amortized payment rather than interest only.

A 40% increase in payment is not unusual.

[DaCounselor]

What a difference a few months make. Yesterday’s 6 month USD LIBOR was reported as 3.79. I think this index is very likely to continue to fall as the Fed continues to ease in ’08. I suggest that the so-called “Alt-A” ARMS with margins in the 2-2.5 range will reset in somewhat close proximity to their initial rates, and may later reset again at rates below the initial rate (aka payment decreases instead of increases) These loans do not appear to be in any imminent danger of blowing up, at least not due to massive payment hikes.

[DaCounselor]

What a difference a few months make. Yesterday’s 6 month USD LIBOR was reported as 3.79. I think this index is very likely to continue to fall as the Fed continues to ease in ’08. I suggest that the so-called “Alt-A” ARMS with margins in the 2-2.5 range will reset in somewhat close proximity to their initial rates, and may later reset again at rates below the initial rate (aka payment decreases instead of increases) These loans do not appear to be in any imminent danger of blowing up, at least not due to massive payment hikes.

[DaCounselor]

What a difference a few months make. Yesterday’s 6 month USD LIBOR was reported as 3.79. I think this index is very likely to continue to fall as the Fed continues to ease in ’08. I suggest that the so-called “Alt-A” ARMS with margins in the 2-2.5 range will reset in somewhat close proximity to their initial rates, and may later reset again at rates below the initial rate (aka payment decreases instead of increases) These loans do not appear to be in any imminent danger of blowing up, at least not due to massive payment hikes.

[DaCounselor]

What a difference a few months make. Yesterday’s 6 month USD LIBOR was reported as 3.79. I think this index is very likely to continue to fall as the Fed continues to ease in ’08. I suggest that the so-called “Alt-A” ARMS with margins in the 2-2.5 range will reset in somewhat close proximity to their initial rates, and may later reset again at rates below the initial rate (aka payment decreases instead of increases) These loans do not appear to be in any imminent danger of blowing up, at least not due to massive payment hikes.

[DaCounselor]

What a difference a few months make. Yesterday’s 6 month USD LIBOR was reported as 3.79. I think this index is very likely to continue to fall as the Fed continues to ease in ’08. I suggest that the so-called “Alt-A” ARMS with margins in the 2-2.5 range will reset in somewhat close proximity to their initial rates, and may later reset again at rates below the initial rate (aka payment decreases instead of increases) These loans do not appear to be in any imminent danger of blowing up, at least not due to massive payment hikes.

[(former)FormerSanDiegan]

Thanks for bringing this up again DaCounselor.

[(former)FormerSanDiegan]

Thanks for bringing this up again DaCounselor.

[(former)FormerSanDiegan]

Thanks for bringing this up again DaCounselor.

[(former)FormerSanDiegan]

Thanks for bringing this up again DaCounselor.

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