Sub-prime Bail Out - Page 3

TheMercenary · 11-07-2007, 07:54 PM

Quote:

Originally Posted by Aliantha

What is an ARM?

ARM's:
A loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a preselected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan.

Aliantha · 11-07-2007, 08:06 PM

We call that initial low rate a honeymoon rate and it normally last for 1 to 2 years and then you're at normal variable rates.

I don't see why arm loans should be more subject to stupid borrowers. In fact, variable rate loans are far more popular in Oz than fixed. I suspect that will change shortly though with market trends the way they are. That is to say, I think if you could get a good fixed rate at the moment you'd be wise because interest rates here are steadily climbing and they're about to go through the roof (in my opinion).

That being said though, if you can't afford an extra $100 per month to cover higher interest rates, you shouldn't be taking out the loan. In fact it is my personal opinion tht if you're not paying off at least $500 more than the minimum of your loan per month, you should rethink what you're doing. It's stupid to take out a loan that you can only just afford.

I don't think the government or anyone else should be offering people bail out deals although I do see the consequences of not trying to prop up the market. The problem is, it is just a prop up, and sooner rather than later, the stilts are going to cave in, and the more bad risks you have sitting on them, the worse the crash is going to be.

I believe banks should immediately address their lending criteria and slowly tighten the belt on existing mortgages that're in default. In this way, the damage would be less than it will be in the future if banks continue to employ these delaying tactics.

TheMercenary · 11-07-2007, 08:22 PM

We have 1 year, 2 year, 5 year and 7 year ARMs (I believe) where rates will stay steady for that initial "year" period and then the sky is the limit.

Wiki has a whole thing about them:

http://en.wikipedia.org/wiki/Adjustable_rate_mortgage

tw · 11-07-2007, 09:46 PM

This economy is now full of adjustable rate whatevers.

These loans were important so that people who could never own a home could, instead, buy one. Or so that people could buy homes larger than they could afford. These groups cannot refinance because they could not afford the home in the first place. And now they cannot sell them because housing prices were significantly inflated by these ARMs and by Fed interest rates that were too low.

Meanwhile getting people into homes no matter what may be widespread. Fannie Mae and Sally Mae may be under investigation by the NY Attorney General.

Another looming problem resided in credit cards. In America, everyone is familiar with the Capital One credit card. Get everyone to transfer their credit card debts to Capital One with its low interest rates. Then when they miss anything completely unrelated to that Credit Card (ie the electric company bill is late), then that Credit Card interest rate increases massively. Now these debtors have seriously increasing debts.

GM is also guilty of playing such games. To maintain sales of poor products, GM simply tapped on of their remaining profit centers - GMAC - their financing company. By offering loans at zero percent, GMAC was simply giving free rebates on grossly overpriced GM cars. When do those losses appear? Four and more years later. Today GM admitted that GMAC is no longer a profit center. Duh-h-h-h.

GM was mortgaging GMAC on a hope that GM profits from cars would return. Maybe if car guys were designing their cars. Now GMAC is no longer a profit center.

GM was holding back on massive losses in a hope that GM would be able to write those losses off on those future profits. Well those not lying to themselves should have seen products not be profitable. GM had to finally concede to those losses - could no longer play spread sheet games to mask those losses. What surprised analysts are how much larger those losses are. Another money game exposed - along with these Adjustable Rate Mortgages and the looming credit card crisis.

glatt · 11-08-2007, 12:39 PM

So I try to look at news like this and think about how it applies to me.

I've been mulling over the idea of buying a new digital tv set. Most consumer electronics come down in price over time, so I expected that if I am patient, and hold off as long as possible, I'll be able to get a medium sized high-def digital TV for a fair price.

BUT, if the dollar is falling, and will continue to fall, should I grab a new TV now? Maybe the future exchange rate will be so unfavorable in a year or two that I won't be able to afford a new TV.

Thoughts?

lookout123 · 11-08-2007, 01:04 PM

buy it with today's dollars but pay it back with the value of future dollars. 0% financing.

tw · 11-08-2007, 01:07 PM

Quote:

Originally Posted by glatt

I've been mulling over the idea of buying a new digital tv set. Most consumer electronics come down in price over time, so I expected that if I am patient, and hold off as long as possible, I'll be able to get a medium sized high-def digital TV for a fair price.

Prices on digital TVs too a sharp dive this past year. Many were selling TVs at slim profits - some were being sold at losses last Christmas. Prices are not likely to go much lower for the next few years. You will need a new tech TV by Feb 2009.

However, with the threat of recession looming, will that $600 TV be a cost burden? This is no time to have credit card debts.

lookout123 · 11-08-2007, 01:15 PM

recessionary periods help those with fixed income sources (teachers, salaried people) play catch up with those that have variable or cyclical income. (sales, services)

credit cards are excellent tools in the hands of disciplined individual. the fact that he hasn't already purchased it on a credit card and has given future value consideration would indicate a disciplined individual.

Shawnee123 · 11-08-2007, 01:16 PM

Quote:

Originally Posted by tw

You will need a new tech TV by Feb 2009.

~snip

There will be converter boxes for non-digital TVs.

glatt · 11-08-2007, 01:31 PM

Quote:

Originally Posted by Shawnee123

There will be converter boxes for non-digital TVs.

So they say. I haven't seen any on the market yet, and I've looked (a little.)

glatt · 11-08-2007, 01:36 PM

Quote:

Originally Posted by tw

However, with the threat of recession looming, will that $600 TV be a cost burden? This is no time to have credit card debts.

True. I wouldn't go into debt to get a stupid tv, but I would be dipping into savings. I can afford it, but part of me recoils at the idea of spending that much (more like $800) on a tv.

lookout123 · 11-08-2007, 01:36 PM

they'll make them available. they aren't stupid enough to think we'll all just pony up for the new tech, when some kid will sit in his mom's basement and figure out how to make a box and start selling them on the street. they'll want the income from the converters that will be made either legally or illegally.

tw · 11-08-2007, 05:01 PM

Quote:

Originally Posted by Shawnee123

There will be converter boxes for non-digital TVs.

Converters were also defined almost 10 years ago when all this was required and when conventional (VHF) TV was slated to be turned off in 2006. Converter boxes were supposed to be made available for $100 with government subsidies. However all this (and Zenith for which much of this was created to protect) are gone, missing, or not discussed.

Meanwhile, most of those HD TVs are a complete insult to me. Instead of receiving a true HD signal, they just widen the screen (make faces fatter) and promote "LOOK! IT’s a BIGger Screen!". No. A true HD picture means that when the Eagles are being taken apart in the Super Bowl, then you can see why on every play as Eagles receivers downfield are being embarrassed. Currently, the low resolution screens still on HD TVs only tunnel in the line of scrimmage. (Those not in N America will have to guess what was just written.)

See also the controversy between HD and Blu-Ray DVDs to appreciate how few facts actually get out to the public due to political correctness and the number of people who know only from what retailers tell them. "You cannot be trusted to know the truth." They get away with it because so many of us don't ask, "Why?" Why are those converter boxes not everywhere? What happened to the government subsidies?

Another question: why are TV receiver circuits so insensitive as to all but require Cable service? And why is this relavent to mortgages?

kerosene · 11-08-2007, 05:19 PM

I have a solution for the TV...throw it away.

tw · 11-08-2007, 05:54 PM

Returning to the topic: Bernanke (Federal Reserve Chairman), in testimony to a joint (Senate and House) committee, said that stagflation is back.

Stagflation was created when government was spending massively, government debts increases, oil prices rose to prices well in excess of $5 per gallon (in today's money), the dollar dropped massively, massive debts from Vietnam were coming due, jobs eventually were lost, GM, Ford, and Chrysler made cars so crappy that one always would not start every cold winter morning in the parking lot, mortgages were hard to obtain, the US 6th fleet at one point could not even put to sea due to fuel shortages, housing market crashed, gold rose to record dollars per oz., heavy machine operators would make best money driving construction equipment onto ships as so many American business were selling off capital equipment just to survive, copper prices increased by a factor of ten, accountants (bean counters) were in great demand while engineers (innovators) had trouble finding jobs, violent crimes increased (as anyone in Philadelphia what the lead news story has been most every night for the past two weeks), the third largest industrial base in the world (US overseas owned businesses) were being sold off completely to pay for America's debts, government was lying about environmental laws and enforcement, that light at the end of the tunnel was finally considered fiction (ie "Mission Accomplished"), and - how curious - the president was a crook AND a liar. Deja vue?

Bernanke has a problem. Core inflation numbers imply near zero inflation. However those numbers exclude things like energy (oil) and food. Two years ago, what $20 once bought in the grocery store now costs almost $30. But there is little inflation? Only according to the official government numbers. We know how honest this government (dominated by wacko extremists) is.

The Fed must raise interest rates to combat inflation? It cannot. According to Bernanke, a recession is a real possibility. So the Fed must lower interest rates? They already did that with prime rates as low as 1% when the threat of recession was less. Having lowered rates too low to make a 2003 economy look good, well, economic forces are now conspiring to take revenge for the easy money.

Nothing suggests stagflation will approach 1970s pain. But then how many here were 16 or older in the 70s? I suspect half in The Cellar have little grasp of anything but a Roaring 20s economy.

Bernanke’s dilemma: This economy has been in a slow destruct mode as America even entered a war that would only cost $2billion and it now created more anti-America uprisings even in S America. How many appreciate why this author has been so appalled for so long? How many know that tw was never even partially aggressive critical of politicians until George Jr came forward to lie routinely? Welcome to the George Jr economy which we will have to pay for in the next ten years.

In 2000, Bill Clinton left America with a $260billion surplus. George Jr quickly turned that surplus into a deficient that had increased to as much as $400 billion. As Cheney said, "Reagan proved that deficits don't matter." Welcome to what those who voted for George Jr were really voting for. This debt created when the economy was at its best - when surpluses are supposed to be created. No decent American has a kind thing to say about this scumbag president. Tw has never (UT, et al should confirm this) in what - 20 years - ever been anywhere near this critical of any leader.

Welcome to what may be the start of stagflation according to Fed Chairman Bernanke.

11-07-2007, 08:06 PM	#32
Aliantha trying hard to be a better person Join Date: Jan 2006 Location: Brisbane, Australia Posts: 16,493	We call that initial low rate a honeymoon rate and it normally last for 1 to 2 years and then you're at normal variable rates. I don't see why arm loans should be more subject to stupid borrowers. In fact, variable rate loans are far more popular in Oz than fixed. I suspect that will change shortly though with market trends the way they are. That is to say, I think if you could get a good fixed rate at the moment you'd be wise because interest rates here are steadily climbing and they're about to go through the roof (in my opinion). That being said though, if you can't afford an extra $100 per month to cover higher interest rates, you shouldn't be taking out the loan. In fact it is my personal opinion tht if you're not paying off at least $500 more than the minimum of your loan per month, you should rethink what you're doing. It's stupid to take out a loan that you can only just afford. I don't think the government or anyone else should be offering people bail out deals although I do see the consequences of not trying to prop up the market. The problem is, it is just a prop up, and sooner rather than later, the stilts are going to cave in, and the more bad risks you have sitting on them, the worse the crash is going to be. I believe banks should immediately address their lending criteria and slowly tighten the belt on existing mortgages that're in default. In this way, the damage would be less than it will be in the future if banks continue to employ these delaying tactics. __________________ Kind words are the music of the world. F. W. Faber

11-07-2007, 08:22 PM	#33
TheMercenary “Hypocrisy: prejudice with a halo” Join Date: Mar 2007 Location: Savannah, Georgia Posts: 21,393	We have 1 year, 2 year, 5 year and 7 year ARMs (I believe) where rates will stay steady for that initial "year" period and then the sky is the limit. Wiki has a whole thing about them: http://en.wikipedia.org/wiki/Adjustable_rate_mortgage __________________ Anyone but the this most fuked up President in History in 2012!

11-08-2007, 01:04 PM	#36
lookout123 changed his status to single Join Date: Apr 2004 Location: Right behind you. No, the other side. Posts: 10,308	buy it with today's dollars but pay it back with the value of future dollars. 0% financing. __________________ Getting knocked down is no sin, it's not getting back up that's the sin

11-08-2007, 01:15 PM	#38
lookout123 changed his status to single Join Date: Apr 2004 Location: Right behind you. No, the other side. Posts: 10,308	recessionary periods help those with fixed income sources (teachers, salaried people) play catch up with those that have variable or cyclical income. (sales, services) credit cards are excellent tools in the hands of disciplined individual. the fact that he hasn't already purchased it on a credit card and has given future value consideration would indicate a disciplined individual. __________________ Getting knocked down is no sin, it's not getting back up that's the sin

11-08-2007, 01:36 PM	#42
lookout123 changed his status to single Join Date: Apr 2004 Location: Right behind you. No, the other side. Posts: 10,308	they'll make them available. they aren't stupid enough to think we'll all just pony up for the new tech, when some kid will sit in his mom's basement and figure out how to make a box and start selling them on the street. they'll want the income from the converters that will be made either legally or illegally. __________________ Getting knocked down is no sin, it's not getting back up that's the sin

11-07-2007, 09:46 PM	#34
tw Read? I only know how to write. Join Date: Jan 2001 Posts: 11,933	This economy is now full of adjustable rate whatevers. These loans were important so that people who could never own a home could, instead, buy one. Or so that people could buy homes larger than they could afford. These groups cannot refinance because they could not afford the home in the first place. And now they cannot sell them because housing prices were significantly inflated by these ARMs and by Fed interest rates that were too low. Meanwhile getting people into homes no matter what may be widespread. Fannie Mae and Sally Mae may be under investigation by the NY Attorney General. Another looming problem resided in credit cards. In America, everyone is familiar with the Capital One credit card. Get everyone to transfer their credit card debts to Capital One with its low interest rates. Then when they miss anything completely unrelated to that Credit Card (ie the electric company bill is late), then that Credit Card interest rate increases massively. Now these debtors have seriously increasing debts. GM is also guilty of playing such games. To maintain sales of poor products, GM simply tapped on of their remaining profit centers - GMAC - their financing company. By offering loans at zero percent, GMAC was simply giving free rebates on grossly overpriced GM cars. When do those losses appear? Four and more years later. Today GM admitted that GMAC is no longer a profit center. Duh-h-h-h. GM was mortgaging GMAC on a hope that GM profits from cars would return. Maybe if car guys were designing their cars. Now GMAC is no longer a profit center. GM was holding back on massive losses in a hope that GM would be able to write those losses off on those future profits. Well those not lying to themselves should have seen products not be profitable. GM had to finally concede to those losses - could no longer play spread sheet games to mask those losses. What surprised analysts are how much larger those losses are. Another money game exposed - along with these Adjustable Rate Mortgages and the looming credit card crisis.

11-08-2007, 12:39 PM	#35
glatt ™ Join Date: Jul 2003 Location: Arlington, VA Posts: 27,717	So I try to look at news like this and think about how it applies to me. I've been mulling over the idea of buying a new digital tv set. Most consumer electronics come down in price over time, so I expected that if I am patient, and hold off as long as possible, I'll be able to get a medium sized high-def digital TV for a fair price. BUT, if the dollar is falling, and will continue to fall, should I grab a new TV now? Maybe the future exchange rate will be so unfavorable in a year or two that I won't be able to afford a new TV. Thoughts?

11-08-2007, 05:19 PM	#44
kerosene Touring the facilities Join Date: Nov 2002 Location: The plains of Colorado Posts: 3,476	I have a solution for the TV...throw it away.

11-08-2007, 05:54 PM	#45
tw Read? I only know how to write. Join Date: Jan 2001 Posts: 11,933	Returning to the topic: Bernanke (Federal Reserve Chairman), in testimony to a joint (Senate and House) committee, said that stagflation is back. Stagflation was created when government was spending massively, government debts increases, oil prices rose to prices well in excess of $5 per gallon (in today's money), the dollar dropped massively, massive debts from Vietnam were coming due, jobs eventually were lost, GM, Ford, and Chrysler made cars so crappy that one always would not start every cold winter morning in the parking lot, mortgages were hard to obtain, the US 6th fleet at one point could not even put to sea due to fuel shortages, housing market crashed, gold rose to record dollars per oz., heavy machine operators would make best money driving construction equipment onto ships as so many American business were selling off capital equipment just to survive, copper prices increased by a factor of ten, accountants (bean counters) were in great demand while engineers (innovators) had trouble finding jobs, violent crimes increased (as anyone in Philadelphia what the lead news story has been most every night for the past two weeks), the third largest industrial base in the world (US overseas owned businesses) were being sold off completely to pay for America's debts, government was lying about environmental laws and enforcement, that light at the end of the tunnel was finally considered fiction (ie "Mission Accomplished"), and - how curious - the president was a crook AND a liar. Deja vue? Bernanke has a problem. Core inflation numbers imply near zero inflation. However those numbers exclude things like energy (oil) and food. Two years ago, what $20 once bought in the grocery store now costs almost $30. But there is little inflation? Only according to the official government numbers. We know how honest this government (dominated by wacko extremists) is. The Fed must raise interest rates to combat inflation? It cannot. According to Bernanke, a recession is a real possibility. So the Fed must lower interest rates? They already did that with prime rates as low as 1% when the threat of recession was less. Having lowered rates too low to make a 2003 economy look good, well, economic forces are now conspiring to take revenge for the easy money. Nothing suggests stagflation will approach 1970s pain. But then how many here were 16 or older in the 70s? I suspect half in The Cellar have little grasp of anything but a Roaring 20s economy. Bernanke’s dilemma: This economy has been in a slow destruct mode as America even entered a war that would only cost $2billion and it now created more anti-America uprisings even in S America. How many appreciate why this author has been so appalled for so long? How many know that tw was never even partially aggressive critical of politicians until George Jr came forward to lie routinely? Welcome to the George Jr economy which we will have to pay for in the next ten years. In 2000, Bill Clinton left America with a $260billion surplus. George Jr quickly turned that surplus into a deficient that had increased to as much as $400 billion. As Cheney said, "Reagan proved that deficits don't matter." Welcome to what those who voted for George Jr were really voting for. This debt created when the economy was at its best - when surpluses are supposed to be created. No decent American has a kind thing to say about this scumbag president. Tw has never (UT, et al should confirm this) in what - 20 years - ever been anywhere near this critical of any leader. Welcome to what may be the start of stagflation according to Fed Chairman Bernanke.

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