[ltokuda]

[quote=sdrealtor]I did not miss that point, I made an assumption that a very large percetnage of those liars have already walked once they were severely underwater.
[/quote]

That’s what doesn’t make sense to me. 80% of option arms were low/no doc. 17% of option arms have already resulted in foreclosure. Even if all of that 17% was low/no doc, that still leaves 63% low/no doc loans still active. It seems to be a bit of a leap to assume that “liars” are mostly gone and the honest low/no doc borrowers are what’s left. Maybe its true, but I just haven’t seen any evidence to support it.

The interesting thing about option arms is that with a low teaser rate, it can actually be cheaper to “own” than to rent. However, if a recast happens and the monthly mortgage goes up by 40%, that equation can change pretty drastically. I’m wondering how many people are riding it out until the math no longer makes sense.

[ltokuda]

[quote=sdrealtor]I did not miss that point, I made an assumption that a very large percetnage of those liars have already walked once they were severely underwater.
[/quote]

That’s what doesn’t make sense to me. 80% of option arms were low/no doc. 17% of option arms have already resulted in foreclosure. Even if all of that 17% was low/no doc, that still leaves 63% low/no doc loans still active. It seems to be a bit of a leap to assume that “liars” are mostly gone and the honest low/no doc borrowers are what’s left. Maybe its true, but I just haven’t seen any evidence to support it.

The interesting thing about option arms is that with a low teaser rate, it can actually be cheaper to “own” than to rent. However, if a recast happens and the monthly mortgage goes up by 40%, that equation can change pretty drastically. I’m wondering how many people are riding it out until the math no longer makes sense.

[ltokuda]

The math seems to add up. It says that the average teaser rate was about 1.5%. The typical accrual rate on the loan is MTA + margin. MTA is about 0.5%. Margin is about 300 basis points = 3%. So the actual accrual rate is about 3.5%. In this scenario, paying the minimum 1.5% each month would put you into a positive amortization situation.

I’m not sure how they calculated a payment shock of just 20-25%. If you were paying 1.5% on a 30 year loan, then after 5 years your loan got recast and you had to pay 3.5% on a 25 year loan, then your monthly payment would go up by 45%.

Also, the article says that 80% of option arms were low or no-doc loans. But it concludes that since over 17% of option arm’s are already in foreclosure, the “bad apples” are mostly gone and what’s left are borrowers who didn’t lie about their incomes. And since option arms generally require a max DTI of 28%, these borrowers should be able to absorb the payment shock.

I don’t know how he came to the conclusion that a 17% foreclosure rate before the big recast wave is a sign that things will be better when the wave hits. That’s a bit bizzare.

[ltokuda]

The math seems to add up. It says that the average teaser rate was about 1.5%. The typical accrual rate on the loan is MTA + margin. MTA is about 0.5%. Margin is about 300 basis points = 3%. So the actual accrual rate is about 3.5%. In this scenario, paying the minimum 1.5% each month would put you into a positive amortization situation.

I’m not sure how they calculated a payment shock of just 20-25%. If you were paying 1.5% on a 30 year loan, then after 5 years your loan got recast and you had to pay 3.5% on a 25 year loan, then your monthly payment would go up by 45%.

Also, the article says that 80% of option arms were low or no-doc loans. But it concludes that since over 17% of option arm’s are already in foreclosure, the “bad apples” are mostly gone and what’s left are borrowers who didn’t lie about their incomes. And since option arms generally require a max DTI of 28%, these borrowers should be able to absorb the payment shock.

I don’t know how he came to the conclusion that a 17% foreclosure rate before the big recast wave is a sign that things will be better when the wave hits. That’s a bit bizzare.

[ltokuda]

The math seems to add up. It says that the average teaser rate was about 1.5%. The typical accrual rate on the loan is MTA + margin. MTA is about 0.5%. Margin is about 300 basis points = 3%. So the actual accrual rate is about 3.5%. In this scenario, paying the minimum 1.5% each month would put you into a positive amortization situation.

I’m not sure how they calculated a payment shock of just 20-25%. If you were paying 1.5% on a 30 year loan, then after 5 years your loan got recast and you had to pay 3.5% on a 25 year loan, then your monthly payment would go up by 45%.

Also, the article says that 80% of option arms were low or no-doc loans. But it concludes that since over 17% of option arm’s are already in foreclosure, the “bad apples” are mostly gone and what’s left are borrowers who didn’t lie about their incomes. And since option arms generally require a max DTI of 28%, these borrowers should be able to absorb the payment shock.

I don’t know how he came to the conclusion that a 17% foreclosure rate before the big recast wave is a sign that things will be better when the wave hits. That’s a bit bizzare.

[ltokuda]

The math seems to add up. It says that the average teaser rate was about 1.5%. The typical accrual rate on the loan is MTA + margin. MTA is about 0.5%. Margin is about 300 basis points = 3%. So the actual accrual rate is about 3.5%. In this scenario, paying the minimum 1.5% each month would put you into a positive amortization situation.

I’m not sure how they calculated a payment shock of just 20-25%. If you were paying 1.5% on a 30 year loan, then after 5 years your loan got recast and you had to pay 3.5% on a 25 year loan, then your monthly payment would go up by 45%.

Also, the article says that 80% of option arms were low or no-doc loans. But it concludes that since over 17% of option arm’s are already in foreclosure, the “bad apples” are mostly gone and what’s left are borrowers who didn’t lie about their incomes. And since option arms generally require a max DTI of 28%, these borrowers should be able to absorb the payment shock.

I don’t know how he came to the conclusion that a 17% foreclosure rate before the big recast wave is a sign that things will be better when the wave hits. That’s a bit bizzare.

[ltokuda]

The math seems to add up. It says that the average teaser rate was about 1.5%. The typical accrual rate on the loan is MTA + margin. MTA is about 0.5%. Margin is about 300 basis points = 3%. So the actual accrual rate is about 3.5%. In this scenario, paying the minimum 1.5% each month would put you into a positive amortization situation.

I’m not sure how they calculated a payment shock of just 20-25%. If you were paying 1.5% on a 30 year loan, then after 5 years your loan got recast and you had to pay 3.5% on a 25 year loan, then your monthly payment would go up by 45%.

Also, the article says that 80% of option arms were low or no-doc loans. But it concludes that since over 17% of option arm’s are already in foreclosure, the “bad apples” are mostly gone and what’s left are borrowers who didn’t lie about their incomes. And since option arms generally require a max DTI of 28%, these borrowers should be able to absorb the payment shock.

I don’t know how he came to the conclusion that a 17% foreclosure rate before the big recast wave is a sign that things will be better when the wave hits. That’s a bit bizzare.

[ltokuda]

I used to be unsure about the public option until I found out what happened to my co-worker. We both have decent jobs with “good” health insurance coverage. I’ve always assumed that if I got sick, my insurance company would take care of me.

Well, unfortunately, my co-worker did get sick and was forced to take a leave of absence. He signed up for COBRA but the sickness & treatments dragged on for over a year. After that, his eligibility for COBRA ran out so his only option now is to buy insurance on the open market with his pre-existing sickness. There’s no way he can afford to buy insurance anymore.

This was a real revelation to me. I’ve talked about this with my friends and they were all shocked to hear it. Everyone thought they were covered. It never occured to them that they were only allowed to be sick for a year or so.

I’m guessing that most people with insurance have absolutely no idea how vulnerable they really are. I understand it and still have a hard time getting my head around it. It just boggles the mind.

[ltokuda]

I used to be unsure about the public option until I found out what happened to my co-worker. We both have decent jobs with “good” health insurance coverage. I’ve always assumed that if I got sick, my insurance company would take care of me.

Well, unfortunately, my co-worker did get sick and was forced to take a leave of absence. He signed up for COBRA but the sickness & treatments dragged on for over a year. After that, his eligibility for COBRA ran out so his only option now is to buy insurance on the open market with his pre-existing sickness. There’s no way he can afford to buy insurance anymore.

This was a real revelation to me. I’ve talked about this with my friends and they were all shocked to hear it. Everyone thought they were covered. It never occured to them that they were only allowed to be sick for a year or so.

I’m guessing that most people with insurance have absolutely no idea how vulnerable they really are. I understand it and still have a hard time getting my head around it. It just boggles the mind.

[ltokuda]

I used to be unsure about the public option until I found out what happened to my co-worker. We both have decent jobs with “good” health insurance coverage. I’ve always assumed that if I got sick, my insurance company would take care of me.

Well, unfortunately, my co-worker did get sick and was forced to take a leave of absence. He signed up for COBRA but the sickness & treatments dragged on for over a year. After that, his eligibility for COBRA ran out so his only option now is to buy insurance on the open market with his pre-existing sickness. There’s no way he can afford to buy insurance anymore.

This was a real revelation to me. I’ve talked about this with my friends and they were all shocked to hear it. Everyone thought they were covered. It never occured to them that they were only allowed to be sick for a year or so.

I’m guessing that most people with insurance have absolutely no idea how vulnerable they really are. I understand it and still have a hard time getting my head around it. It just boggles the mind.

[ltokuda]

I used to be unsure about the public option until I found out what happened to my co-worker. We both have decent jobs with “good” health insurance coverage. I’ve always assumed that if I got sick, my insurance company would take care of me.

Well, unfortunately, my co-worker did get sick and was forced to take a leave of absence. He signed up for COBRA but the sickness & treatments dragged on for over a year. After that, his eligibility for COBRA ran out so his only option now is to buy insurance on the open market with his pre-existing sickness. There’s no way he can afford to buy insurance anymore.

This was a real revelation to me. I’ve talked about this with my friends and they were all shocked to hear it. Everyone thought they were covered. It never occured to them that they were only allowed to be sick for a year or so.

I’m guessing that most people with insurance have absolutely no idea how vulnerable they really are. I understand it and still have a hard time getting my head around it. It just boggles the mind.

[ltokuda]

I used to be unsure about the public option until I found out what happened to my co-worker. We both have decent jobs with “good” health insurance coverage. I’ve always assumed that if I got sick, my insurance company would take care of me.

Well, unfortunately, my co-worker did get sick and was forced to take a leave of absence. He signed up for COBRA but the sickness & treatments dragged on for over a year. After that, his eligibility for COBRA ran out so his only option now is to buy insurance on the open market with his pre-existing sickness. There’s no way he can afford to buy insurance anymore.

This was a real revelation to me. I’ve talked about this with my friends and they were all shocked to hear it. Everyone thought they were covered. It never occured to them that they were only allowed to be sick for a year or so.

I’m guessing that most people with insurance have absolutely no idea how vulnerable they really are. I understand it and still have a hard time getting my head around it. It just boggles the mind.

[ltokuda]

[quote=sd_matt]
Last time I checked roads were built with DMV fees and gasoline taxes. If I am wrong then I’m wrong. But that is the way it should be…not an argument to justify more control by a very incompetent government.

Let people decide for themselves to be healthy or unhealthy.

Whoever said your indoctrinated is right. You refuse to say whether or not you think those in Congress are competent.

And if you do acknowledge that they are incompetent then you are outright insane since you want them to handle your health care.[/quote]

I believe the interstate highway system was built by the U.S. government. The idea is that interstate highways benefit the country as a whole and make it stronger. But if you left it up to each state or county to build their portion of the highway, no one would want to pay for it.

I don’t think anyone is arguing that congress will run a public option with supreme competence. But remember that the goal of the public option is to pay for your medical expenses when you are sick. The goal of a private insurance company is to not pay for your expenses. So the public option might be incompetent at trying to pay you. But private companies are very competent at not paying you. Who would you trust more?

[ltokuda]

[quote=sd_matt]
Last time I checked roads were built with DMV fees and gasoline taxes. If I am wrong then I’m wrong. But that is the way it should be…not an argument to justify more control by a very incompetent government.

Let people decide for themselves to be healthy or unhealthy.

Whoever said your indoctrinated is right. You refuse to say whether or not you think those in Congress are competent.

And if you do acknowledge that they are incompetent then you are outright insane since you want them to handle your health care.[/quote]

I believe the interstate highway system was built by the U.S. government. The idea is that interstate highways benefit the country as a whole and make it stronger. But if you left it up to each state or county to build their portion of the highway, no one would want to pay for it.

I don’t think anyone is arguing that congress will run a public option with supreme competence. But remember that the goal of the public option is to pay for your medical expenses when you are sick. The goal of a private insurance company is to not pay for your expenses. So the public option might be incompetent at trying to pay you. But private companies are very competent at not paying you. Who would you trust more?

[ltokuda]

[quote=sd_matt]
Last time I checked roads were built with DMV fees and gasoline taxes. If I am wrong then I’m wrong. But that is the way it should be…not an argument to justify more control by a very incompetent government.

Let people decide for themselves to be healthy or unhealthy.

Whoever said your indoctrinated is right. You refuse to say whether or not you think those in Congress are competent.

And if you do acknowledge that they are incompetent then you are outright insane since you want them to handle your health care.[/quote]

I believe the interstate highway system was built by the U.S. government. The idea is that interstate highways benefit the country as a whole and make it stronger. But if you left it up to each state or county to build their portion of the highway, no one would want to pay for it.

I don’t think anyone is arguing that congress will run a public option with supreme competence. But remember that the goal of the public option is to pay for your medical expenses when you are sick. The goal of a private insurance company is to not pay for your expenses. So the public option might be incompetent at trying to pay you. But private companies are very competent at not paying you. Who would you trust more?

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