Wednesday, September 19, 2007

Point/Counterpoint:The Fed Rate Cut Will Help Save Our Home :-) / Minyanville

LOL! It is very hard for me to stand one day without Minyanville´s "Five Things You Need To Know". The humor is just priceless. Like in this case. For a more serious view on this topic i recommend to read What the Fed's rate cut does -- and doesn't -- mean for mortgages from Mike Larson

LOL! Ich freue mich jeden Tag auf Minyanville´s"Five Things You Need To Know". Deren Humor ist einfach köstlich und trifft den Nagel auf den Kopf. Wie auch in diesem Fall. Für eine ernstere Betrachtungsweise kann ich jedem empfehlen What the Fed's rate cut does -- and doesn't -- mean for mortgages von Mike Larson zu lesen.

The Fed Rate Cut Will Help Save Our Home / Richard Jones
Thank you Fed Chairman Ben Bernanke, thank you! With yesterday's 50 basis point cuts in both the Federal Funds and Discount rates, we finally are able to see some welcome respite on the horizon. Why, banks even followed suit almost immediately by lowering their prime rates 50 basis points as well. Yes, relief is finally here!

I don't mind telling you, the little missus and I were worried. In 2002 we took out a $500,000 Option ARMS mortgage, an adjustable rate mortgage with the option of making interest only payments for the first five years with a five-year incremental step-up in payments.

Everything was looking fine for the first five years. Our initial monthly payment on the Option ARMs mortgage was around $1,600. Over the past five years it has slowly crept up to $2100. That extra $500 is beginning to hurt. In August, however, our mortgage lender sent us a note telling us what the 2008 payment is going to be. Prepare to grab the seat of your pants: $4,100!!!! That's right, $4,100!!! Who can afford a payment like that?!?!

Even worse, thanks to what they call "negative amortization," whatever that means, they say our original loan balance of $500,000 is now $535,000!!! How did that happen?!?! Obviously we were worried. That kind of mortgage payment would ruin us. We'd have to sell... assuming we could find a buyer. And I don't even know that we could sell for a price that covers the $535,000 mortgage!

Well, thanks to Big Ben we're back in business, baby. Our refinancing papers are already in! We're going to take down a fixed-rate mortgage this time at a payment we can handle. See, thanks to the Federal Reserve, things usually work out just fine. My wife and I can sleep at night. Thank you Fed Chairman Bernanke! Now, I'm going to buy Alan Greenspan's new book, he's the one who started this whole thing.

Thanks to The Onion

Counterpoint By Darren Salisbury, Loan Officer
Mr. Jones, I'm Afraid There's a Little Problem With Your Refinancing Application

Is this Robert Jones? I meant Richard, sorry. Richard Jones at 233511 Magnolia Stone Haven Wintergardengreen Court Acres Estates? Ok, good. Wow, uh... Mr. Jones, I, uh, I hate to be the bearer of bad news here, but there seems to be a slight problem, with, ah, with your refinancing application. No, no we got the $500 processing fee check, no problem there. That's not refundable, by the way, just want to be clear on that. Right. Yeah, it, uh, just kind of looks like we're not going to be able to approve this refinancing package.

Yes, I'm sure. Whoa, absolutely, I agree $4,100 a month is way, way too high for a house in, ah, where are you? Right, Magnolia Stone Haven Wintergardengreen Court Acres Estates. Hey, did the developer ever finish the community pool and recreation facilities there? Wow, I'm surprised at that. They were the same developers as Crystal Glen Squire Thirstwood Cove Hammock Lake and they finished the community pool and rec center on that development six or eight months before they abandoned it. Well, on the bright side, with the Fed rate cut and all, maybe they'll come back and finish it. Would certainly help the resale value.

Yes, I checked on that and unfortunately you're outside the GSE guidelines and, look, if it ain't GSE it ain't gettin' done these days. Have you tried taking in some boarders, maybe raising some cash by renting out the east wing? Sure, but you have, what 5,600 square feet there, right? Ok, just a thought. Well, good luck with everything. If it gets down to the wire for you, give me a ring back. My brother-in-law handles distressed property sales.

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Blogger Edgar said...

hi jmf,

Too true, the funny ones always are.

3:51 AM  
Blogger jmf said...

Moin Edgar,

nice to see that the long end is acting rational and is going up....

What the rate cut mean for you / Table WSJ

4:33 AM  

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