Affluent Black County Mired In Mortgage Mess

[Elephant Walk]

Originally Posted by BluPhire

Typical of what? Those dark folks you have issues with?

Why would I have issues with "dark folks"?

It's typical that DrPhil/DSTChaos to obsess over skin-color...and then go onto discuss some "skin-based reason" for something happening. It's typical to blame any other race for "failures", instead of taking responsibility.

Apparently "racial minorities" have been targeted by "predatory lending" (whatever that means, borrowing is a persons own decision, so I'm not sure how anything could be "predatory"), but I think the stats will bear out that in this crisis the counties underwater are mostly white or hispanic.

[BluPhire]

^^^

LOL Exactly. I don't even know why he tries anymore.

[Elephant Walk]

Originally Posted by BluPhire

^^^

LOL Exactly. I don't even know why he tries anymore.

I saw what was said.

She clearly still believes that some may have resulted from discrimination.

She's still obnoxious...why does it matter if Prince George's County is underwater? There are a hundreds of counties well underwater with tons of various demographics.

Oh wait, it's because she's obsessed with race. It's annoying and I'm tired of seeing it always pull up.

[knight_shadow]

Originally Posted by Elephant Walk

why does it matter if Prince George's County is underwater?

Because MSNBC wrote an article about it. DrPhil didn't.

If you're tired of seeing it, don't click on the threads

[AGDee]

There are ARMs that are not bad. I got an ARM 10 years ago. It was fixed for 2 years and after that, it is adjusted annually. It is a set percentage above LIBOR. It cannot change more than 2% at one time (up or down) and it cannot go higher than 5% above the original rate. It is currently at 4% and has gone down every single year since it has been adjusting. There are no "gotchas" of a balloon payment at the end of a certain time period or anything. Even if mortgage rates skyrocketed now, they would have to continue to skyrocket for 5 years before I would hit the max at this point. Yes, there is a danger that it could go up to 13% max, but it really isn't likely that we'll see the LIBOR go up that high over the next 10 years. It is a pretty safe ARM. I'd have been paying 8% for the last 10 years had I gotten a traditional mortgage and I'd be unable to re-fi at this point because the house could never appraise for high enough in this economy. Mine is a very low risk ARM and has served me well.

[DrPhil]

Originally Posted by AGDee

There are ARMs that are not bad. I got an ARM 10 years ago. It was fixed for 2 years and after that, it is adjusted annually. It is a set percentage above LIBOR. It cannot change more than 2% at one time (up or down) and it cannot go higher than 5% above the original rate. It is currently at 4% and has gone down every single year since it has been adjusting. There are no "gotchas" of a balloon payment at the end of a certain time period or anything. Even if mortgage rates skyrocketed now, they would have to continue to skyrocket for 5 years before I would hit the max at this point. Yes, there is a danger that it could go up to 13% max, but it really isn't likely that we'll see the LIBOR go up that high over the next 10 years. It is a pretty safe ARM. I'd have been paying 8% for the last 10 years had I gotten a traditional mortgage and I'd be unable to re-fi at this point because the house could never appraise for high enough in this economy. Mine is a very low risk ARM and has served me well.

Yes, some people have benefited from ARMs, particularly people who (1) don't plan on living in the home after the time that the rate will be adjusted; and (2) people who have considered what they will do when the rate increases (perhaps not 13% but they still need to consider how they will pay if the rate is higher than expected).

Since life is difficult to predict, many people (homebuyers and housing professionals) are recommending against ARMs if the only incentive is the introductory rate. That and the economic crisis fueled the housing crunch once people's dream house's introductory rate increased to the prevailing rate and people couldn't pay (partly because the average American doesn't save much money and doesn't build wealth).

Originally Posted by Boodleboy322

People are still originating the vanilla Agency ARMs and Jumbo ARMs but the underwriting guidelines are stricter. Yes there is still risk that people will default just like any committment you make when you borrow money. There is always a chance that someone won't make the payment (even for folks with higher credit scores) for whatever reason. The Credit Score and low DTIs are a gauge that tells the lender if the borrower is most likely to make their payments and prepay the mortgage.

The days of not qualifying on a 30yr Mortgage and getting tossed into an "ARM" are gone. If anyone in the banking world is still originating Hybrid Option ARMs (definition: a mortgage that would allow you to get a 1.00% interest rate for the first three months and then cast into options of either going Fully Am, Interest Only, Fixed, etc that was typically attached to the MTA or COFI index) then the risk is being retained on a balance sheet at the bank and is not going into the securities market. Those types of securities have no liquidity. Yes, prior to the Subprime meltdown if a borrower couldn't get underwritten on a 30yr Conventional they had an option to get into a Hybrid Option ARM which had looser underwriting guidelines to get into a mortgage.

Thanks for explaining. As for the bolded, some mortgage lenders are advising people against ARMs whereas other mortgage lenders present ARMs as a wonderful, fool-proof option (which is why research is important). Either way, people generally may not be tossed into an ARM but, especially when using a mortgage lender that doesn't advise against an ARM, people are choosing the ARM either immediately or after not qualifying for the 15 or 30 year fixed rate. What eventually happens to a lot of people after that introductory rate moves to the prevailing rate has been discussed in this thread.

If I had a dollar for every time I read "don't let mortgage rates/bad credit/whatever keep you from your dream home" on a mortgage lender's website in 2011. People need to buffer their excitement with research. There are home buyer and mortgage tools that help people consider the potential pros and cons of it all.

[AOII Angel]

ARMs are a risk. Not all are created equally obviously. Subprime loans got us into this mess, and luckily those have been axed. I have a 5 year arm on my B'more house. We didn't think we'd be there 5 years...we were right. It resets next year, and hopefully we will be selling it by then. If we don't, it won't be a tragedy. Even if the rates don't stay this low, we will be able to afford the difference. I will hopefully be closing on a condo in Phoenix next Monday with a 30 year fixed. I agree with Dr. Phil. I'm not messing with a 5 year arm this time. We only have to put down 5% so the equity we have in the property is not enough to refinance later down the line.

[Boodleboy322]

Originally Posted by DrPhil

Thanks for explaining. As for the bolded, some mortgage lenders are advising people against ARMs whereas other mortgage lenders present ARMs as a wonderful, fool-proof option (which is why research is important). Either way, people generally may not be tossed into an ARM but, especially when using a mortgage lender that doesn't advise against an ARM, people are choosing the ARM either immediately or after not qualifying for the 15 or 30 year fixed rate. What eventually happens to a lot of people after that introductory rate moves to the prevailing rate has been discussed in this thread.

Which lender is underwriting ARMs for customers that do not qualify on a fixed rate mortgage? That sounds like a red flag.

[DrPhil]

Originally Posted by Boodleboy322

Which lender is underwriting ARMs for customers that do not qualify on a fixed rate mortgage? That sounds like a red flag.

To clarify, for customers who do not qualify for a particular size of mortgage loan.

To answer your question, mortgage lenders who know that lower introductory rates mean lower introductory payments. Therefore, homebuyers can qualify for a larger loan to fit the dream house that people are told not to let mortgage rates/bad credit/whatever keep them from.

[Boodleboy322]

Originally Posted by DrPhil

To clarify, for customers who do not qualify for a particular size of mortgage loan.

To answer your question, mortgage lenders who know that lower introductory rates mean lower introductory payments. Therefore, homebuyers can qualify for a larger loan to fit the dream house that people are told not to let mortgage rates/bad credit/whatever keep them from.

That still doesn't provide a specific name. I'm asking for specific names of those lenders (i.e. Wells Fargo, Citi, Bank of America, XYZ Credit Union, etc).

[Boodleboy322]

People are still originating the vanilla Agency ARMs and Jumbo ARMs but the underwriting guidelines are stricter. Yes there is still risk that people will default just like any committment you make when you borrow money. There is always a chance that someone won't make the payment (even for folks with higher credit scores) for whatever reason. The Credit Score and low DTIs are a gauge that tells the lender if the borrower is most likely to make their payments and prepay the mortgage.

The days of not qualifying on a 30yr Mortgage and getting tossed into an "ARM" are gone. If anyone in the banking world is still originating Hybrid Option ARMs (definition: a mortgage that would allow you to get a 1.00% interest rate for the first three months and then cast into options of either going Fully Am, Interest Only, Fixed, etc that was typically attached to the MTA or COFI index) then the risk is being retained on a balance sheet at the bank and is not going into the securities market. Those types of securities have no liquidity. Yes, prior to the Subprime meltdown if a borrower couldn't get underwritten on a 30yr Conventional they had an option to get into a Hybrid Option ARM which had looser underwriting guidelines to get into a mortgage.

[AGDee]

I should also note, with mortgage rates what they are now, it's silly to get an ARM because it can go nowhere but up. Unless the LIBOR was 0, mine is currently as low as it can possibly go. When the rate was 8.75% (when I bought it), it was a good risk. I'm trying to pay down a lot of extra principle while rates are this low because then if they do go back up again, I won't be paying interest on as much principle.

[DrPhil]

Originally Posted by AGDee

I should also note, with mortgage rates what they are now, it's silly to get an ARM because it can go nowhere but up. Unless the LIBOR was 0, mine is currently as low as it can possibly go. When the rate was 8.75% (when I bought it), it was a good risk. I'm trying to pay down a lot of extra principle while rates are this low because then if they do go back up again, I won't be paying interest on as much principle.

I agree.

Yet, people are still enticed by the (even slightly) lower rate of particular ARMs. This topic has come up more and more and I've been reading more on the subprime mortgage crisis. It's sad. I think a lot of people are still in favor of ARMs at face value and regardless of the details. This has a substantial impact on the "middle class" and disproportionately impacts homebuyers who are racial and ethnic minorities.

Interesting article:
http://www.businessinsider.com/don-b...-market-2011-6

Originally Posted by Munchkin03

I have a lot more to say about this, which will have to wait--mainly about the pressure that affluent blacks receive from family and friends to buy a house right away after finishing college or graduate school, by any means necessary. For so many people, homeownership is the American Dream fulfilled and this yearning may be even stronger for blacks and Hispanics. The hysteria of the mid-aughts increased that since people were afraid of "being priced out."

Calling Munchkin03 to the dancefloor. LOL.

[Munchkin03]

Originally Posted by DrPhil

I agree.

Yet, people are still enticed by the (even slightly) lower rate of particular ARMs. This topic has come up more and more and I've been reading more on the subprime mortgage crisis. It's sad. I think a lot of people are still in favor of ARMs at face value and regardless of the details. This has a substantial impact on the "middle class" and disproportionately impacts homebuyers who are racial and ethnic minorities.


Calling Munchkin03 to the dancefloor. LOL.

I'm here! Finally! I was out of town for a wedding this weekend and was mad busy in the days leading up to it.

I hinted at this upthread, but there's a lot of pressure for black professionals to buy houses even when it might not be the best time to do so in their lives. It used to be that homeownership was the official sign that "you've made it," and you can still see it with a lot of black Baby Boomers and Greatest Generation folks. When I got my masters, my father was on me hard to buy--I knew it was a dumb idea, given how mutable my life was and how expensive real estate was in NYC, and I chose to focus my financial priorities on building savings and investing for retirement. I'll have the rest of my life to buy a house. But, there are a lot of people in their early to mid 20s who take what their parents say as gospel, especially if their parents did "well." (It's a relative term since so many Black Greatest Generation and Baby Boomers had stable government or union jobs, VA housing loans, and the GI bill to get out of college without debt. It would require lot more income--and much lower housing costs--to replicate that sort of middle-class prosperity today.)

This pressure is a lot worse in areas where there are lots of young black professionals--DC and Atlanta come to mind--and those happen to be places where housing stock is pretty expensive. Black young professionals, more so than their white and Asian counterparts, come out of school with more debt and less family assistance for things like down payments and closing costs. Lenders knew what they were doing by reaching out to these folks with no-down-payment loans with teaser interest rates. Also, back in 2005 or so, people were afraid of being priced out of the real estate game.

It's just a messy situation all around, and today's black professionals--most of whom were either first generation college students and/or first generation homeowners--were more vulnerable than their white colleagues with similar education and income.

Did anyone read the NYTimes article a few years ago, about how their economics editor got sucked into one of these crazy loans? He's white, but he lives in the DC area. Unlike the PG County folks, he was able to spin a book out of the experience, and the advance saved him from foreclosure (he was about 8 months behind).

[DrPhil]

Originally Posted by Munchkin03

I'm here! Finally! I was out of town for a wedding this weekend and was mad busy in the days leading up to it.

I hinted at this upthread, but there's a lot of pressure for black professionals to buy houses even when it might not be the best time to do so in their lives. It used to be that homeownership was the official sign that "you've made it," and you can still see it with a lot of black Baby Boomers and Greatest Generation folks. When I got my masters, my father was on me hard to buy--I knew it was a dumb idea, given how mutable my life was and how expensive real estate was in NYC, and I chose to focus my financial priorities on building savings and investing for retirement. I'll have the rest of my life to buy a house. But, there are a lot of people in their early to mid 20s who take what their parents say as gospel, especially if their parents did "well." (It's a relative term since so many Black Greatest Generation and Baby Boomers had stable government or union jobs, VA housing loans, and the GI bill to get out of college without debt. It would require lot more income--and much lower housing costs--to replicate that sort of middle-class prosperity today.)

This pressure is a lot worse in areas where there are lots of young black professionals--DC and Atlanta come to mind--and those happen to be places where housing stock is pretty expensive. Black young professionals, more so than their white and Asian counterparts, come out of school with more debt and less family assistance for things like down payments and closing costs. Lenders knew what they were doing by reaching out to these folks with no-down-payment loans with teaser interest rates. Also, back in 2005 or so, people were afraid of being priced out of the real estate game.

It's just a messy situation all around, and today's black professionals--most of whom were either first generation college students and/or first generation homeowners--were more vulnerable than their white colleagues with similar education and income.

I agree. There's a reason why these things disproportionately impact Blacks. That includes those who were discriminated against by lenders/didn't have the proper resources and those who consciously spent way more than they could comfortably afford.

Originally Posted by Munchkin03

Did anyone read the NYTimes article a few years ago, about how their economics editor got sucked into one of these crazy loans? He's white, but he lives in the DC area. Unlike the PG County folks, he was able to spin a book out of the experience, and the advance saved him from foreclosure (he was about 8 months behind).

Is this his story? Yikes.

http://www.huffingtonpost.com/2009/0..._n_203305.html