Sure, these are still out there for fresh suckers, but the point I'm making is that a huge number of these toxic loans have already been made,
idorfman.com
the clock is already ticking on resets and regular amortization. There are also big penalties for refinancing.
<1.25% interest for 5 years>
No, this kind of teaser rate only lasts for six months, or at most one year. Maybe others can discuss the various common products, also? Of course the borrower pays for that with upfront fees. At the end of the teaser, it's adjusted to the index (Libor, or CMT) with a margin, usually with an annual cap. So they may get 1.25 for six months, 3.25 for another year (with the difference 2.25% plus, negatively amortized), then 5.25 year two (more neg amortization), then if it's a 3/27 it's all regular amortized, at the true market rate. There are generally three kinds of IO, 2/28 seem to mostly be subprime, those are highly toxic, 3/27, and then 5/25. |
