So sad, and Bush seems he cannot fix the situation!
My financial advisor says SIT.

No one is really 'stuck' with an ARM!

The terms (including the maximum it can adjust to) are clearly spelled out in the paperwork that is signed. If you don't like the terms, don't sign off on them.

I think we were duped by a very skilled Mortgage Broker as I am sure many were. They made things look great and kinda just slid over the ugly parts. There seems to be 3 feet of paperwork at closings, how can anybody read it all in one day let alone a few hours. I just feel so bad for so many of the people I talk to. You used to be able to trust your Banker, Insurance Agent and Mortgage rep. Where did those days go?

They made things look great and kinda just slid over the ugly parts.
Yep...and that is exactly why there are so many foreclosures, and these financial institutions being stuck with real estate that isn't even worth what is owned them on it.

You used to be able to trust your Banker, Insurance Agent and Mortgage rep. Where did those days go?
I kind of see it as greed on the part of big business. They had to know that a lot of folks would never be able to afford to make the payments when the arm went up...yet they loaned the money anyway...probably then selling off the mortgage to another company.

50/50 between real estate agents who push these loans in order to sell people a house they can't really afford it, and on the buyers who don't bother reading the docs they sign.

Thank goodness our house is paid for!! I didn't know what ARM stood for!

I remember the days when you could call your local banker from a car dealership or an auction or anywhere, tell him what you wanted to buy, and he'd say, "No problem. Write a check and then come see me." Doing business is so different these days.

And yes, sleezeball lenders took advantage of people. Some greedy borrowers got in too deep by buying homes to flip them...those are the ones I have a hard time feeling sorry for.

I didn't know either vannie until I read the post. I haven't, but my #3 DD was. Luckily a couple years ago they refinanced and got it at a lower and locked in rate.
Leslie

vannie, ARM is adjustable rate mortgage.

The name alone should be a warning, that the rates are going to change. Personally, on the three houses I've been involved in purchasing over the years, I *did* read each document before signing. It draws the meeting out significantly, but I figure I need to understand the details of a promise I'm making to pay back hundreds of thousands of dollars.

And I can't comprehend that it isn't spelled out beforehand (or at the very least, at closing) that a rate of 5% will jump to 10% in 5 years or whatever. I imagine most people thought they would refinance before that jump happened, and then the market tanked and they couldn't refinance enough to cover the remainder of their loan since the home is no longer considered to be worth that much.

It is a huge mess, and I admit to being somewhat resentful that somehow the government is expected to bail out these people.

I too am one for reading ANY contract before I blindly sign it. We started out with an ARM, but once we were able to refinance without a penalty, better believe we did.

I think some agents take the attitude of "You don't really need to read all that information, just sign the papers." I'm a firm believer in reading anything before I sign any type of contract. Got burned once by doing that and swore I wouldn't let it happen again!

Some real estate agents are just as bad. I know they work on the commission but if you tell them your maximum is $100,000 you will get a listing for $125,000

Then you fall in love with the higher priced home and suddenly you realize that you can't afford it.

samkaren
your resident DJ

The real estate agents are the gateways for the loans.
I had an experience a year ago, with a young person, with a bad credit score...telling me that their real estate agency's "credit counselor" had found them a mortgage loan.
I looked at the papers, and couldn't believe what I saw. Thankfully, I did manage to talk them out of it.

The real estate agency was a very large national one.

We had an ARM loan when we bought our cabin, but we knew we would pay it off in 3 years. Our rate could go up/down yearly. Lucky for us, on year two the rate went down and we could pay it off in two years. I'd rather rent than have an ARM like they have today. Now it's supposedly really tough to get a mortgage. Yes, much of the problem was realtors and mortgage companies, but there's also the problem with people wanting everything NOW instead of saving up for a decent down payment.

I for one think the government should stay out of this ARM mess and let the market take care of itself. When you can get a mortgage and not even be asked if your income is sufficient to pay it and then cry when you get in way over your head and expect everybody else to help you...sorry no sympathy for you. caveat emptor!!

june

We took out a home equity loan to do some repairs on our house, namely to update the kitchen and bath. It was an ARM. The payments started out at $220 a month and kept jumping up, soon they were $335. We inheirited a large amount when MIL died in 2005. We used our inheiritance to get rid of that monkey on our back!