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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (71756)	11/28/2007 11:48:13 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Why would we think a fully indexed ARM is going to go up that much? For instance, a local bank in my area showcases a popular 2 year ARM, fully indexed at 2.5% above the one year constant maturity rate. That rate is 3.0% this week. What's this? A fully indexed ARM at 5.5%? Doesn't seem to me to be that big a deal. Now if bonds go into major correction, all bets are off. My bet is, they won't, and most of the ARM resets this year will be painless and possibly the biggest non-event of 2008. My bet is he does not know what he is talking about. In spite of 75 basis points in cuts mortgage rates are where they were a year ago. However that is only for the primest of prime loans. Lending standards are tighter across the board so try getting that 5.5% ARM. Most that need it can't get it. To top it off a huge portion of those loans, especially in California, are pay option arms where the borrower cannot even afford the teaser rate. Mish