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

To: Roads End who wrote (45845)	11/18/2005 9:31:22 PM
From: John Vosilla	Respond to of 110194

"For the life of me I can not see what the motivation was to save a crummy point or two with an ARM when rates were at rock bottom" I think people wanted more house and (or) better location so the low start payment allowed them to qualify for a much larger mortgage.

To: Roads End who wrote (45845)	11/18/2005 9:41:55 PM
From: ild	Respond to of 110194

I once saw a chart where percentage of ARMs was a function of interest rate spread, but not a function of absolute rates. In 2003 spread was large, so people got ARMs. EDIT: Found it. idorfman.com EDIT2. Narrative As you’d expect, when conventional mortgage rates are well above adjustable rates, we’ve seen a pretty nice uptick in the volume of adjustable rate mortgage originations as naturally folks have chosen the lower near term cost avenue. And when the spread has been tight, ARM originations have naturally contracted. We direct your attention to the right hand side of the chart. The spread is now narrow and ARM originations are still quite high relative to historical experience. It’s out of step with history. Why is this happening? In our view of life, prices have gotten so high that ARM’s are now required for many folks just to qualify for loans. In other words, relative to historical experience, folks have been reaching to buy in 2005 unlike another other time in the last decade at least.