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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Wyätt Gwyön who wrote (93930)11/6/2007 11:00:07 AM
From: Think4YourselfRead Replies (3) of 306849
 
A couple of points:

Yes, you hit a big unknown right on the head with your LIBOR comments. As I mentioned earlier Chancel's LIBOR post this morning worries me.

The fed will continue to cut. They won't want to but will have to. ARM's are tied to LIBOR but fixed rates are tied to the fed funds rate. Those who can't refinance out of their ARM's are dead meat (i.e. subprime). The rest WILL refinance into fixed rate loans, which makes looking at the ALT-A and prime ARM resets going forward a wasted exercise. Think about this for a minute. You have an ARM that is going to reset from 3% to 8% next March. If you can get a fixed rate loan you will only go to about 5.5-6%. This is a no brainer. You will beg, borrow, and steal to come up with whatever is needed to get that fixed rate loan. I repeat, anyone who has the means to refinance out of their ARM either already has in the last two months, or will before the rate resets. The non-subprime resets are not an issue other than meaning more fees for the banks and mortgage originators. I don't understand why so many people are having trouble with this. If you put yourself in the position of the borrower it is a no brainer decision. If you can refinance you will.

I don't necessarily go with the idea that many will try to hold onto their houses as long as possible THIS TIME (and that is an important caveat). When that ARM rate resets the writing will be on the wall in big neon letters. Even the dimmest people will be able to see it.
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