As the facts come in people are getting a better idea about what is really going on.

It's not banks that gave the money, its the scum that took the money and ran.

I can see how it could work quite well for short-term situations but I just don't see how people can be shocked once that rate starts rising. Maybe my pessimism keeps me out of some of the trouble.

Given your in the business, how much of the trouble would you ascribe to 1) Knowledgeable speculators 2) Unknowledgeable weekend seminar goers and 3) People that were just duped by a broker, that could creatively get them into something they didn't understand well enough.
It's all a lot like just selling cars for the right monthly payment without considering the total sum of the payments. People are strung out from buying everything based on what their monthly payment will be, instead of how much it will really cost. My sense of this is we're just getting started.

For the record I have not sold a single Option ARM and sold 2 sub-primes, one of the sub primes is in a good conforming loan now and I have no clue what happened to the other.

People were begging for Option Arms, with almost all of them we managed to show them that it is a dangerous path with the current climate, Michigan started the nose dive first so we were cautious when OA's were peaking. I couldn't creatively get someone into one because personally I don't know enough about them to make a rational discussion other than if you can sell the property or refinance before it adjusts don't do it.

The seminar thing is funny because it taught people how to be so unrealistic its hard to believe they had the $299 to buy the course/seminar. People quit their jobs and sold liquid assets to buy into the BS. I wonder if a savvy lawyer could class action the get rich quick schemes.

It's just amazing that some people will always buy into that stuff. I used to work in retail brokerage offices, and on a daily basis somebody would come in with a dream of riches. They'd have spent thousands on some course, but never have enough money left to open an account. You gotta feel sorry for people like that - they're stressed.
The post office should not allow their employees to attend these things.:D

I received a VIP invitation to a Real Estate scaminar last year, I took it because it was a mile from my office and the caterer was awesome, other than good food I saw people dressed to the 9's acting like this was the beginning of their new "life" I felt sorry as hell for the people now in hindsight they are perps. I'm sure I will see the same crew at the next mega-vitamin scaminar.

I urge everyone to attend one and people watch, my favorite are the husband and wife teams.

Investors made up a big part of the low rate ARMs, but there was a sizeable group of homeowners that were buying well beyond their means in either a starter home or upgrading to a larger property. What is upsetting to me, is not that those folks face financial ruin, but that their buying frenzy resulted in higher property tax valuation for those of us that were sensible enough to stay out of the market.

Golly, sounds like the multi-level marketing thing I went to back in the late 1980's.

As soon as I started reading that the ARM meant your rate could go up...and continue to do so I sell "hell no." I still got nailed by first time buyers ignorance though. My realtor assured me that my payment would stay where it was other than small yearly increases from taxes. He failed to notice that I was buying from the initial owner and my tax rate would be double what the house payment was based on. Yep, that didn't rear its ugly head until a year later. Last month (another year later) I finally recovered from the $380 house payment spike to cover the escrow debt and increase and my payment just dropped about $175/mo. I'm still not happy, but it's a little less painfull each month.

Can't wait for the market to stabilize so I can sell and move.

The Powerpig Rule of Finance: Only buy what you can afford and pay cash or "same as cash for xx months/years" I've only had two car payments in the past 30 years and one was just to give my then new wife a good credit rating.

This example describes the 25 year old couple that bought a starter home just down the street from me two years ago.

I wondered how in the hell a young, just-married couple could afford a $600,000 home.

After I met them, the husband explained that his good buddy from high school is in the loan business, and got them in a negative amortization ARM loan. It's kind of hard for a simpleton like me to understand, but his interest rate is artificially set low for the first several years, and his payment is also artificially set so low that it not only does not pay any principal at all, but also does not cover all of the interest due. I suppose this is what leads to negative amortization. His principal keeps going higher and higher.

To add insult to injury, after maybe 4 or 5 years ( I don't remember ), his interest rate adjusts up. He figures his house payment is going to probably triple. He thinks his "good buddy from high school" is just going to get him into another one of these creative loans. Good luck.

He also needed a second mortgage to avoid paying PMI. I have no idea what happens to this loan over time.


Me? I am more of save and invest kind of a guy. I have always tried to live beneath my means.

I lived in a 3 bedroom townhouse for almost 12 years, almost payed off the mortgage entirely, and sold it for a record amount in my complex. I used the proceeds and put a massive down payment on a nice 4 bedroom house in a nice neighborhood.

For first time buyers FHA loans are hard to beat.

CT also has the CHFA program. You can get a 30 year fixed for an amazingly low interest rate, and 3% down is commen.