Who Raised the Rate That Is Causing All These Foreclosures?

[George Ellerman]

Who raised the ARM rate that is the cause of all the foreclosures?

Loan and mortgage companies who would put their mother in these bad situations for a commission are,INMHO, the cause of most of this mortage crisis. 125% loans, all interest payment loans,ARM loans with impossible ballon payments after five years, sub prime income verification laxity,
skippy "hit-the-number"appraisals, and outright fraud all caused by originators have basically fueled this crisis. That coupled with the immediate-need-for-gratification-and-no-regard -for-tomorrow-primarily generation x consumers have brought this situation to a dangerous point.
Ignorance of finance by consumers (due to crappy education in this country) is also a factor. I can honestly say that I have seen this ignorance grow over my 30+ years in this business. Greed fuels this problem. Greed on the part of loan originators and consumers alike.

 

[moh malekpour]

All adjustable rates have starting base rates which are offered by lenders and accepted by borrowers at the time of loan transaction. base rates are tied to some indexes such as short fed rates, 11th district rates, libor rates or other short T bills rates. Each base rate has a margin which also offered at the time of loan transaction and varies from 2 to 3% which is going to be added to the base rate. Say, your rate is tied to Libor and is started at 5% and the margin is 3%, the actual rate on your mortgage is going to be 8%. The margin remains the same for the life of mortgage but the base rate goes up and down according to the index rate that the loan is tied to.
Some sleezy adjustable rates have teaser rates. This is the way to lure borrowers to take the loan. It is not the actual rate or starting base rate and will expire after 1 or 2 years. When it expries, the starting base rate and the margin takes effect and from then it is going to fluctuate depending on the index rates.
If index is the fed rate, and the margin is 3%, the actual interest on loan is 8.25%. If the fed brings the rate down to 1%, the interest on that loan would be 4% so, the lowering or increasing Fed rates has effect on adjustable rates.

 

[Scott Kibler]

I blame the Priory of Sion.

 

[Mike Kennedy]

Bretton Woods failed.

Tell that to the modern "Gang of 8" and the Central Banks.

 

[Randolph Kinney]

Tell that to the modern "Gang of 8" and the Central Banks.

Mike, from Wikipedia:

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold; and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold.

Exchange rates are the primary policy to rectify trade imbalances. That is why fixed exchange rates must fail. OTOH, if a country chooses to solve its trade imbalance by devaluation of its currency, that causes other monetary problems and imbalances.

The G8 has failed too.