Sunday, August 20, 2006

mish vs cramer on arms

dank geht an mish http://globaleconomicanalysis.blogspot.com/und in gewisserweise auch an cramer. ohne seine aussertzer hätten wir alle weniger zu lachen und diskutieren.

hier geht es um das hauptthema die zinsanpassung ders arms. in diesem speziellen fall von country wide um die sonderform der pay-option-arm (oder neg arms, kredite mit negativer tilgung).

The Baltimore Sun is reporting that Countrywide is sending letters to Pay Option ARMs holders.

Countrywide Home Loans, quietly has begun sending out letters to thousands of borrowers who have been making only the minimum payments on the company's popular "PayOption" adjustable-rate mortgages.

The letters explain that "this is an early message to alert you that, based on your current payment trends and potential future interest rate changes, the monthly payment you will be required to pay may increase significantly."

A model letter provided to me by Countrywide includes this hypothetical example of what could be ahead for a California homeowner currently making only minimum payments monthly on a $402,000 loan.

The current full interest rate on the loan is 7.6 percent, but the borrower has been paying just $1,348.47, far less than what's needed to fully amortize the mortgage over its 30-year term.

If the loan reset at today's rates, the letter explains, the full payment required would be $2,887.50 - more than double what the homeowner has gotten used to paying. Future reset rates could be even steeper, making the potential payment crunch much worse.


John G. Walsh, a senior official at the federal Comptroller of the Currency, recently described his agency's concerns about poorly informed borrowers who don't realize that their artificially low monthly payments won't continue indefinitely.

"We've had consumers tell us they didn't know that after making 60 minimum payments on a [payment-option loan], they would owe more than they did when the loan was brand-new. They should certainly understand the basic bargain: The price of a low payment now is a much higher payment later.

"I think it goes without saying," added Walsh, "that someone, at some point, should have explained this" to borrowers with these loans.

Cramer: Pay Option Arms are Prudent

It seems like the good folks at Countrywide were not tuned in to Cramer when he said Panic Over Option ARMS Is Just Noise. immobilienblasen: cramer wie zu dot.com zeiten

The borrowers are not morons. They can read the papers, too. They recognize that homes aren't selling.

I would bet that most of these borrowers are simply younger people with new jobs who are correctly taking advantage of a low rate. People who have taken this rate have been very right. The long end hasn't gone up. It seems like it won't go up now. So while they build up some savings with the low rate, they get stronger down the road and then can take the higher rate.

The media call it dangerous. I call it prudence.

These loans work as long as employment stays steady. The fact that it has tells me not to worry, that this is just another phantom problem not worth fretting about.

mish:

Prudence? No worries? Phantom Problem? Does anyone take this guy seriously?How long is employment supposed to say steady and how many people are now upside down and trapped? Look at the comments from the Comptroller of the Currency about people not understanding how these loans work...............

denke hier fällt diee entscheidung relativ leicht wer hier richtig liegt. denke diese aussagen von cramer haben zwar noch nicht ganz die qualität wie zu dot.com zeiten. er steigert sich aber schon wieder bedenklich. habe hier (dank geht an nic c) noch was leckeres zu cramer:

http://www.kbcafe.com/articles/HTTP.Chasm.pdf. empfehlungen einer investorenkonferenz vom januar 2000 bei einem nasdagstand von über 5000 punkten. empfehlungen u.a.

1) SVNX was trading at $1,000 when he recommended it at this conference. Itis now $8.
2) ARBA was around $2,000 at that time, it is now at $3.

gruß
jan-martin


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