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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (45691)	11/16/2005 10:05:16 PM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

I just read that 45% of mortgages out there are ARM's that will reset in the next 12 months. You are right that more should be refinancing into fixed but the most likely reason they aren't is they could never qualify at 6.5% pay rate when most likely they were already stretched on the ratios at 1% or 2%.

To: Ramsey Su who wrote (45691)	11/16/2005 11:02:54 PM
From: ild	Read Replies (1) \| Respond to of 110194

Besides people who have 30 year fixed I know ones who have 5/1 taken in 2003. Option Arm became popular in 2005. Before 5/1 IO was the mainstream here in CA.

To: Ramsey Su who wrote (45691)	11/16/2005 11:54:48 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

Ramsey - It will be interesting to see what happens when 4.42 is broken on the downside on the 10 yr. I believe STRONGLY but WLD disagrees STRONGLY that FNM will get whipsawed at this turnaround. Either way I suppose it will not matter and the action itself is what matters. The question will be: if 4.42 gets broken substantially will refis pick up? I say they will not. I further say they will not at 4.30 or 4.10 It will be interesting to see how this plays out. If we break decisevly and FNM rehedges and nothing happens they subject themselves to more whipsaws if they change their mind. Mish

To: Ramsey Su who wrote (45691)	11/17/2005 2:57:19 AM
From: GraceZ	Respond to of 110194

I have a fixed primary mortgage but most people with a HELOC have an adjustable rate mortgage. Back when I still had a HELOC, it was an adjustable rate. My loan officer kept calling me up once a year trying to get me to switch to a fixed. Tried to get me to switch at 7%, then 6.5%, then 5% all the way down to 4.5% where we paid it off. That said, anyone who took out an ARM two years ago (around when I refied my principle mortgage) instead of a fixed still has a rate that is no higher than my fixed, so they are ahead for taking the ARM. The ARM rates were below 4% when I got a 5.5% 15 year so not only did they get below 4% for 2 years but now they are no worse off than me for another year or whatever interval they have for their rate to adjust. While the adjustment may be painful for someone who couldn't afford the higher payment, the guy who took the ARM out to save money is doing just fine. If he was smart he paid the higher payment the first two years and paid down the principle at an accelerated rate during the time he had the lower rate. My husband had an ARM on one of our rentals. Before we sold it last month the rate was 3.8% and was going to adjust up to 4.8% in November. When he first took it out in 1986 it was 10%. That mortgage payment just got cheaper and cheaper the whole time we owned the house. Of course that may have been the best period in history to have had an ARM and no one expects rates to fall like that from here. The real problem with the ARM is that it is almost always lower than fixed rates at whatever level rates are, so switching to a fixed always involves a higher payment. The last thing you want to do is switch just as rates make an intermediate top. Then you watch rates drop and you are either stuck with a fixed or refinancing again.