You are assuming it was a choice. As explained above, my credit made me look like a “risk”. That’s why I had an ARM and why most do. But, if you pay your bills, should that not prove you are not a risk? Doesn’t work out that way right now.

“The problem with all of your arguments is that none of that should have been a surprise to you. ARM was not the ONLY financing option you had; you chose that with 0 down and now when you have to up the ante, you are in trouble because you bought a house before you were ready (in the traditional sense) to buy.”

ARM was the only option. Well, that, or not buying a home.

I paid 10% down plus closing costs.

My “risk” was a bankruptcy a few years ago due to abusiness that went south. But, I have a long credit history and was AAA. I make good money and have paid my mortgage no problem.

I am a very good risk, but the bankruptcy made me look bad. I made good money and still do. That bankruptcy made the computers choke.

So, I get an ARm, 2 year later my credit rating is 70 points higher, and I make 20k a year more than I did when I signed that loan. Yet, I may still lose my house because of the markets. Because there could be a lot of houses in my zip code that have foreclosed and sold very cheap. Right now, they appraise you house, not on the houses sold around you in the last year, but in the last THREE MONTHS. The skews it towards the foreclosures. 8 moths ago, 3 houses around mine sold for $50k more than I paid. When I bought my house it appraised $20k above what I paid and we dramtically renovated. Doesn’t matter now if 3 houses foreclose this month around me….

I hope your neighbor forecloses and your house is worth half what it was 6 months ago. You deserve it.

Wake up!

I have an ARM because that was what was available to me. You think I would choose that over a fixed loan? You are drinking the Kool-aid.

I’ll say it one more time and maybe you’ll hear.

You get an ARM because the bank thinks you are a risk. You pay your mortgage on time, no problem for 2 years, and then the interest rate sky rockets. And there is a huge penalty for paying off early. So, you MUST refinance in 2 years or see your interest rate go to 13%, or pay a big penalty for paying off early. This is the banks way of getting more out of you because you were a risk. Okay. That may be fair. In 2 years, my credit is better and I can get a better loan.

But, it didn’t work that way. Your house isn’t worth what it was because people within a few miles of you have foreclosed. And, 6 months ago you could get a refi of 100% and they’d even roll your closing charges into the loan. Now you need 3-10% down. Unless you knew that a while ago, you are not prepared. Do you have 10% of your home’s value in the bank right now? I don’t.

And do you think banks want to own your home and try to get their money out rather than convert that ARM into a fixed and have you continue to live there and pay the mortgage? How does it make sense to not do that? How is it good to have a few million more houses foreclose? Will you happily see your neightbor (and your house is worth what has sold in the last 6 months within a few miles of your house) foreclose and watch your home value fall due to no fault of your own?

If you can’t pay your mortgage, fine. But if you pay your mortgage fine for 2 years and then find yourself in a mess that the capital markets made, that sucks. You did your part. I did my part.

There are a lot of ARMs out there like ticking time bombs. The mess the economy is in won’t be over until all the ARMs either foreclose or get refinanced into fixed loans. That’s still 2 years away. We have not come close to the bottom. And the banks are not making it easier to refinance, so MORE people who have paid their mortgage for the past 2 years will be foreclosing. And that effects every house within the zip code’s value. That means you. Laugh it up. Your house’s value will go down too. Eventually, they all will. Give it 2 more years of foreclosures and lending markets drying up.

Stop listening to the pundits. They are absurd. This is caused by the lenders. And it could be stopped tomorrow if all the ARMs were converted to fixed rate mortagages at the interest rate the loans originated at. Let people continue to pay the monthly rate they have been paying for 2 years. If they can’t do that, fine. But, if the banks insist on then raising the rates to 13% and watching as houses foreclose and home prices free fall, well, we’re all screwed.

I have excellent credit. I have a long credit history. I have lots of chances to get out of this mess. I am lucky. But a lot of people are getting screwed. They did their part. they paid their mortgage. And they are losing their houses. Is that right?

No way. I don’t believe it. Go back to Scotland and look again. They may call it something else, so look for the yellow and black lettering, sassy waitresses, and hashbrowns that are delightfully crispy on the outside and cooked just right in the center.

I highly recommend the book for all novices like myself that would like a little background on how economics works.