Don’t Look Now But The Second Shoe Is About To Drop!
August 7th, 2007
By: Dean Konstantine
Did you know that 70% of adjustable rate mortgage will be adjusting in the next 12 to 18 months? The worst may still be ahead for the sub-prime mortgage holders. The 2/28 loans have been a devastating ordeal for people thinking they would refinance their way out of these loans at the end of their two year fixed period or before their loans adjusted.
Why would anyone agree to such a nasty loan? Simple, they could not afforded the home of their dreams without the 2/28 reduced intro rate loan? No. It should be no surprise to the mortgage bankers who funded them and the mortgage back securities investors who bought these loans since the Fed steadily raised rates for fear of inflation, which I might add they, the Fed created when they drop their Fed rate to 1% in 2001. Read my article on www.deankonstantine.com
Now the Fed has spoken and they fear inflation more then mortgage defaults since they kept their rate unchanged today. Leaving mortgage rates to continue to climb if current economic trends do not change.
Now we have the politicians telling us how we need new regulations put into place so those bad brokers won’t be able to pull the wool over the eyes of the unsuspecting consumer! Looking back we know millions of these loans were sold with the blessing of the federal government who was encouraging home ownership for some who otherwise could not qualify to become home owner even with government programs like FHA, VA or Fannie, Freddy.
Was it really the brokers? No, of course not, the brokers only sell what is available to sell, brokers can not underwrite nor fund these loans, they can only submit them to the bankers who underwrite and fund these loans! Did the bankers create and fund these loans because they love people and really wanted to help with the home ownership dreams of the less fortunate? Not likely, they did it because of the huge and I mean huge profits made by these loans! Profits that make the oil companies feel poor!
We know Ms Clinton wants donations from the wealthy bankers for her campaign, so siding with them is only natural, brokers don’t have the money nor the political clout of the Wall Street bankers. But before throwing stones, think about this, auto dealers don’t build the cars, they only sell them, brokers can’t create the loans they sell, only big money can do that! Try to get it straight Ms Clinton.
I know people are led to believe brokers falsify information to get approvals for their clients and maybe a handful go that rout, but do you really think every broker is willing to risk their license to do business by breaking the law when they know the layers of quality control involved with a loan package? Not very likely. But before the pot starts calling the kettle BLACK maybe someone should look at the integrity and the self serving actions of politicians sounding alarm.
So, please stand by because if things do not get put in order the second shoe will drop soon in the form of the 3/27’s as they are known in the industry, the three year fixed ARMs now on the horizon and ready for adjustment. This might be avoided if the Fed inflates money again like it did to bail out their friends in the stock market crash of 2000. Follow along at www.deankonstantine.com
Entry Filed under: Consumer Issues, House Of Mathematics, Commerce, Business, Politics, Uncategorized