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(former)FormerSanDiegan
ParticipantAlthough, I don’t think lenders will voluntarily reduce rates, one should consider potential scenarios for rates actually re-setting at reasonably low rates at some point in this cycle.
Nobody here seems to think that could happen.
First, it is instructive to consider the terms of many of these loans. For your more standard ARMS (Alt-A and Prime), they will typically reset to an index (e.g. 6- or 12- month LIBOR 6 month or 1 year treasury) plus a margin (e.g. 2.25%).
Consider that the LIBOR is at about 5.2-5.3 for the 6- or 12-month index. That means that for typical ARM loans resetting now, the rates would be something in the range of 7.45 to 7.55.
This is based on the terms when the loan was taken out.
If the economy tanks and short-term rates decline (as they have in 5 of the past 6 recessions), it is possible that loan resets could be in the 6% range or lower.
It’s too late for many of the loans about to reset this year. But, this is a plausible scenario for loans resetting in the second wave of resets.
ParticipantAlthough, I don’t think lenders will voluntarily reduce rates, one should consider potential scenarios for rates actually re-setting at reasonably low rates at some point in this cycle.
Nobody here seems to think that could happen.
First, it is instructive to consider the terms of many of these loans. For your more standard ARMS (Alt-A and Prime), they will typically reset to an index (e.g. 6- or 12- month LIBOR 6 month or 1 year treasury) plus a margin (e.g. 2.25%).
Consider that the LIBOR is at about 5.2-5.3 for the 6- or 12-month index. That means that for typical ARM loans resetting now, the rates would be something in the range of 7.45 to 7.55.
This is based on the terms when the loan was taken out.
If the economy tanks and short-term rates decline (as they have in 5 of the past 6 recessions), it is possible that loan resets could be in the 6% range or lower.
It’s too late for many of the loans about to reset this year. But, this is a plausible scenario for loans resetting in the second wave of resets.
ParticipantAlthough, I don’t think lenders will voluntarily reduce rates, one should consider potential scenarios for rates actually re-setting at reasonably low rates at some point in this cycle.
Nobody here seems to think that could happen.
First, it is instructive to consider the terms of many of these loans. For your more standard ARMS (Alt-A and Prime), they will typically reset to an index (e.g. 6- or 12- month LIBOR 6 month or 1 year treasury) plus a margin (e.g. 2.25%).
Consider that the LIBOR is at about 5.2-5.3 for the 6- or 12-month index. That means that for typical ARM loans resetting now, the rates would be something in the range of 7.45 to 7.55.
This is based on the terms when the loan was taken out.
If the economy tanks and short-term rates decline (as they have in 5 of the past 6 recessions), it is possible that loan resets could be in the 6% range or lower.
It’s too late for many of the loans about to reset this year. But, this is a plausible scenario for loans resetting in the second wave of resets.
Participantthey handed the kids candy
Hmmm … candy from strangers, eh ?
Bet you wouldn’t let ’em do than in CA.Participantthey handed the kids candy
Hmmm … candy from strangers, eh ?
Bet you wouldn’t let ’em do than in CA.Participantthey handed the kids candy
Hmmm … candy from strangers, eh ?
Bet you wouldn’t let ’em do than in CA.ParticipantPerry –
I agree with you 100% regarding the new tract home areas being more susceptible. There is no history in the early 1990’s downturn for some of these areas.
ParticipantPerry –
I agree with you 100% regarding the new tract home areas being more susceptible. There is no history in the early 1990’s downturn for some of these areas.
ParticipantPerry –
I agree with you 100% regarding the new tract home areas being more susceptible. There is no history in the early 1990’s downturn for some of these areas.
ParticipantBold is
Off ?
What about
the italics
ParticipantBold is
Off ?
What about
the italics
ParticipantBold is
Off ?
What about
the italics
ParticipantPerry, I don’t understand.
Sentence 1: “I still don’t see how certain areas would be immune (or drop less percentage wise) to the downturn.”
Sentence 3: “Areas that appreciated and held up better were central areas such as Hillcrest, Mission Hills and Bay Park.”
So, these central areas held up better in the 1990’s. Right ?
It could happen again, right ?
ParticipantPerry, I don’t understand.
Sentence 1: “I still don’t see how certain areas would be immune (or drop less percentage wise) to the downturn.”
Sentence 3: “Areas that appreciated and held up better were central areas such as Hillcrest, Mission Hills and Bay Park.”
So, these central areas held up better in the 1990’s. Right ?
It could happen again, right ?
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