Comments on: The Truth about Option ARMs, Pick-a-Pay Mortgages, and Alt-A Loans: Looking at Wells Fargo, Bank of America, and JP Morgan. We are in the Eye of the $469 Billion Toxic Mortgage Hurricane and Silence is not Golden. http://www.doctorhousingbubble.com/the-truth-about-option-arms-pick-a-pay-mortgages-and-alt-a-loans-looking-at-wells-fargo-bank-of-america-and-jp-morgan-we-are-in-the-eye-of-the-469-billion-toxic-mortgage-hurricane-and-silence/ How I Learned to Love Southern California and Forget the Housing Bubble Thu, 09 Feb 2012 06:16:36 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: SL http://www.doctorhousingbubble.com/the-truth-about-option-arms-pick-a-pay-mortgages-and-alt-a-loans-looking-at-wells-fargo-bank-of-america-and-jp-morgan-we-are-in-the-eye-of-the-469-billion-toxic-mortgage-hurricane-and-silence/#comment-87757 SL Thu, 28 Apr 2011 21:32:36 +0000 http://www.doctorhousingbubble.com/?p=1823#comment-87757 @ dlazz (or anyone else new to this whole mess that may be confused) There is absolutely no truth that minimum payments would be higher than the accrued interest. That's the reason they were called "teaser rates". The way these loans were typically structured was a "fully amortizing" payment calculated at 1% interest. Your actual interest rate would be the fully indexed rate of margin plus the 1 mo. LIBOR index (or COFI index or whatever). At the time most of these loans were originated, the fully indexed rate would have been around 7.000 based on a 2.900 margin. The reason it was called an Option ARM was your payment options were as follows(based on a $300,000 loan): Initial rate: 1.000% payment = $964.92/mo. True interest only payment (at 7%)= $1750/mo. 30 year amortization payment = $1995.91/mo. 15 year amortization payment = $2696.48/mo. You would have this payment structure until the loan recast period of 5 years or the negative amortization ceiling, usually 125% of initial principle balance, in the $300,000 example that would be $75,000 in unpaid interest) was reached It is true that the interest accrued using the current fully indexed rate of 3.125% is less than the teaser rate (but only based on the initial principle amount, not the likely current principle amount), but the loan was originated 5 years ago, and the damage has already been done as far as the negative equity goes, and everyone who had these mortgages is almost certainly still in them because of the loss of value from the date they bought the home because of the failing real estate market, compounded with the fact that they have underpaid their interest accrued for five years. @ dlazz (or anyone else new to this whole mess that may be confused)
There is absolutely no truth that minimum payments would be higher than the accrued interest. That’s the reason they were called “teaser rates”.

The way these loans were typically structured was a “fully amortizing” payment calculated at 1% interest. Your actual interest rate would be the fully indexed rate of margin plus the 1 mo. LIBOR index (or COFI index or whatever). At the time most of these loans were originated, the fully indexed rate would have been around 7.000 based on a 2.900 margin. The reason it was called an Option ARM was your payment options were as follows(based on a $300,000 loan):

Initial rate: 1.000% payment = $964.92/mo.
True interest only payment (at 7%)= $1750/mo.
30 year amortization payment = $1995.91/mo.
15 year amortization payment = $2696.48/mo.

You would have this payment structure until the loan recast period of 5 years or the negative amortization ceiling, usually 125% of initial principle balance, in the $300,000 example that would be $75,000 in unpaid interest) was reached

It is true that the interest accrued using the current fully indexed rate of 3.125% is less than the teaser rate (but only based on the initial principle amount, not the likely current principle amount), but the loan was originated 5 years ago, and the damage has already been done as far as the negative equity goes, and everyone who had these mortgages is almost certainly still in them because of the loss of value from the date they bought the home because of the failing real estate market, compounded with the fact that they have underpaid their interest accrued for five years.

]]> By: fajensen http://www.doctorhousingbubble.com/the-truth-about-option-arms-pick-a-pay-mortgages-and-alt-a-loans-looking-at-wells-fargo-bank-of-america-and-jp-morgan-we-are-in-the-eye-of-the-469-billion-toxic-mortgage-hurricane-and-silence/#comment-72214 fajensen Wed, 26 Jan 2011 15:22:35 +0000 http://www.doctorhousingbubble.com/?p=1823#comment-72214 "Why buy when you can rent" applies to Women equally well. The rent goes up if you want them whining and pleading ;-) “Why buy when you can rent” applies to Women equally well. The rent goes up if you want them whining and pleading ;-)

]]> By: Robert Birkland http://www.doctorhousingbubble.com/the-truth-about-option-arms-pick-a-pay-mortgages-and-alt-a-loans-looking-at-wells-fargo-bank-of-america-and-jp-morgan-we-are-in-the-eye-of-the-469-billion-toxic-mortgage-hurricane-and-silence/#comment-69167 Robert Birkland Wed, 05 Jan 2011 14:50:10 +0000 http://www.doctorhousingbubble.com/?p=1823#comment-69167 Pick a Pay loans are just beginning to take investors, home owners and communities apart. Wells Fargo (Wachovia) is only the beginning. Check out U.S. Bank 'The Bank' (loans taken over from Downey Savings and Loans). We have leveraged with the use of our financial advisor/loan agent in 2006 and are at 5 years in June 2011 when the loans recast. We have 4 denied loan modifications. The loan began at $1795 about and then will recast August 2011 to $3550. U.S. Bank states that they are community based thinkers, but what I can see, they are just holding onto their assets. Check out their new adds. Thousands saved on mortgages if you deal in 2011. Why don't they just modify their current loans about to recast and save consumers homes and investments. Thanks for the opportunity to blast U.S. Bank, they are hiding in the dark and hoping they don't get hit like Wells Fargo. We are current on the loans but when the payments climb from $1200 to $1700 per loan, we will be done!! Dr. B, I wish I had found your site in 2006. With regards! R. Birkland Pick a Pay loans are just beginning to take investors, home owners and communities apart. Wells Fargo (Wachovia) is only the beginning. Check out U.S. Bank ‘The Bank’ (loans taken over from Downey Savings and Loans). We have leveraged with the use of our financial advisor/loan agent in 2006 and are at 5 years in June 2011 when the loans recast. We have 4 denied loan modifications. The loan began at $1795 about and then will recast August 2011 to $3550. U.S. Bank states that they are community based thinkers, but what I can see, they are just holding onto their assets.

Check out their new adds. Thousands saved on mortgages if you deal in 2011. Why don’t they just modify their current loans about to recast and save consumers homes and investments. Thanks for the opportunity to blast U.S. Bank, they are hiding in the dark and hoping they don’t get hit like Wells Fargo. We are current on the loans but when the payments climb from $1200 to $1700 per loan, we will be done!!

Dr. B, I wish I had found your site in 2006. With regards! R. Birkland

]]> By: marc http://www.doctorhousingbubble.com/the-truth-about-option-arms-pick-a-pay-mortgages-and-alt-a-loans-looking-at-wells-fargo-bank-of-america-and-jp-morgan-we-are-in-the-eye-of-the-469-billion-toxic-mortgage-hurricane-and-silence/#comment-53573 marc Thu, 26 Aug 2010 13:09:56 +0000 http://www.doctorhousingbubble.com/?p=1823#comment-53573 Is there any adjustment for Option ARM and Alt-A loans that may have been refinanced into fixed rate or new Option ARM and Alt-As? I am just wondering if some of the graphs on the number or resets coming up are no longer accurate and may have been deflated by letting off some of the pressure through refinancing. Is there any adjustment for Option ARM and Alt-A loans that may have been refinanced into fixed rate or new Option ARM and Alt-As?

I am just wondering if some of the graphs on the number or resets coming up are no longer accurate and may have been deflated by letting off some of the pressure through refinancing.

]]> By: LuftMensch http://www.doctorhousingbubble.com/the-truth-about-option-arms-pick-a-pay-mortgages-and-alt-a-loans-looking-at-wells-fargo-bank-of-america-and-jp-morgan-we-are-in-the-eye-of-the-469-billion-toxic-mortgage-hurricane-and-silence/#comment-43930 LuftMensch Fri, 08 Jan 2010 21:14:00 +0000 http://www.doctorhousingbubble.com/?p=1823#comment-43930 --Agreed that many waves of recasts/foreclosure to come --Doubts about the size of shadow indicate, for example, people can't get loan mods unless they are 90 days late, some lenders are telling borrowers to become late to get the mod. --Value of money is not based on how much gold is in the world--as far as I can tell our fiat money is based on the ability of the issuing country to tax. I would think about evaluating it just like a personal financial statement...think of money as IOU bonds issued by the country, based on the income-stream of their future tax-payments, enforced by police power. Someone could do a present value of money calculation on this...figure out a P/E ratio for the dollar etc... –Agreed that many waves of recasts/foreclosure to come

–Doubts about the size of shadow indicate, for example, people can’t get loan mods unless they are 90 days late, some lenders are telling borrowers to become late to get the mod.

–Value of money is not based on how much gold is in the world–as far as I can tell our fiat money is based on the ability of the issuing country to tax. I would think about evaluating it just like a personal financial statement…think of money as IOU bonds issued by the country, based on the income-stream of their future tax-payments, enforced by police power. Someone could do a present value of money calculation on this…figure out a P/E ratio for the dollar etc…

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