Dr Housing Bubble 12/19/08

[Crewleader]

Option ARMs for Dummies:
Why 4.5 Percent Mortgages Rates will do Absolutely Nothing for these Toxic Assets.

I’ve been sorting through numerous e-mails especially after the 60 Minute show looking at Option ARM mortgages. If anything, I think the show has caused more confusion and I have even seen some articles posted online that are incredibly off base on this one subject area. Some now think that the 4.5% mortgage rate is somehow going to save those in Option ARMs. It is not that simple. In addition, there is a difference between a re-cast (as in, re-calculating your loan) and a loan adjustment on more bread and butter adjustable rate mortgages. The thing about option ARMs is they fly under the umbrella of adjustable rate mortgages yet are insanely toxic. There are many implications that are being missed and I feel it warrants and article to clear up at least the most elementary components of the loan.

What is an Option ARM mortgages?

The option ARM is a loan that is an adjustable rate mortgage with the added flexibility of a variety of payment options on your monthly mortgage. The gist of these mortgages was to increase the flexibility of your monthly payment. These loans have a low introductory rate that allows you to make very low initial payments and the low qualifying rate also allowed many people to buy more home than they could otherwise afford with more conventional mortgages. When I show you a real case example of an Option ARM, you will completely understand why these mortgages had no place in the marketplace.

The option ARM has four major type payment options:

http://www.doctorhousingbubble.com/option-arms-for-dummies-why-45-percent-mortgages-rates-will-do-absolutely-nothing-for-these-toxic-assets/