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We're not even halfway through the LAST ARM debacle, and already attempts to push new ARMs!
Such a fine idea when the likelihood of an interest rate spike due to inflation is pretty much near 100%...
http://www.sfgate.com/cgi-bin/articl...REU213FLG2.DTL
At least a little disclosure...
Followed by...
More CYA
But of course, must have the sales pitch
So, pushing ARMs for those unable to get jumbo loans, and with 'follow the low rate' by using Treasury indexes.
Ugh!
Such a fine idea when the likelihood of an interest rate spike due to inflation is pretty much near 100%...
http://www.sfgate.com/cgi-bin/articl...REU213FLG2.DTL
Now, rates on bigger mortgages are giving borrowers cause to carefully consider ARMs, and mortgage specialists say they are worth a look.
"Some borrowers right now must consider an ARM," said Keith Gumbinger, a vice president at HSH Associates, a financial industry publisher. He said that is especially true of those who need jumbo loans - mortgages so big that lenders cannot sell the loan to Fannie Mae or Freddie Mac, the government-sponsored companies that resell mortgages to investors\
"Some borrowers right now must consider an ARM," said Keith Gumbinger, a vice president at HSH Associates, a financial industry publisher. He said that is especially true of those who need jumbo loans - mortgages so big that lenders cannot sell the loan to Fannie Mae or Freddie Mac, the government-sponsored companies that resell mortgages to investors\
Lately, Gumbinger said, interest rates on 30-year fixed jumbo loans have hovered around 7.5 percent. At that level, a borrower with a $750,000 loan would pay $5,249 monthly. By comparison, a buyer who opts for a 5/1 ARM - in which the rate remains fixed for five years but then varies every 12 months according to a particular market index - could get an initial interest rate of 6.56 percent. On a monthly basis for the first five years, the ARM costs $4,770, or $479 less.
If, however, the borrower keeps the home for many years and rates steadily rise, he could end up paying the maximum rate, which is typically capped at six percentage points above the starting rate. A rate of 12.5 percent would certainly sting.
Of course, ARM rates can also drop, and borrowers can save if rates go down.
Interest rates on ARMs are commonly tied to one of three market indexes: the Federal Home Loan Bank's 11th District cost of funds index (COFI), the London interbank offered rate (Libor), or the one-year United States Treasury index (Treasurys for short).
The COFI is typically less volatile than the other indexes, Gumbinger said.
ARMs tied to the Libor have been hammered recently. Since Sept. 1, rates after the initial fixed period on these loans have jumped by more than 1.5 percentage points, to about 6.25 percent.
The COFI is typically less volatile than the other indexes, Gumbinger said.
ARMs tied to the Libor have been hammered recently. Since Sept. 1, rates after the initial fixed period on these loans have jumped by more than 1.5 percentage points, to about 6.25 percent.
By contrast, those with ARMs tied to the COFI index saw their rates remain steady in that time. Those with ARMs tied to the weekly Treasury indexes had their rates drop by half of a percentage point, to 4.34 percent.
Ugh!
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