Re: [RT] Trading Diary: False Breaks Warn Of A Market Top, RealTraders Email List Archive

Gene,

Don't hit the Taverns like I used to but I can say that traffic hasn't picked up with the usual snowbird activity I've seen in the past. These days January - March seems to be the "height" of the season. Did you make it to "Downtown at the Gardens"?? I work in a building right in front of the complex for an Internet bank as the Retail Mortgage Sales Manager. I cover the nation. Proud to say after about 1000 loans over the last 5.33 yrs, no defaults (on loans that remain on our books) mainly because I sold only about 5 option ARM's during that period of time. About 80% of the 1st mortgages were fixed (Internet borrowers are well informed, you'd be surprised to see the quality of borrowers who "shop" the net). Still very busy because every one is scrambling to get out of their ARM's before they move into the adjustment period while rates are still at historic lows.

Lenny

PS - IMO, we've seen nothing yet! Wait until you see all those option ARM's implode! I'll be conservative and say that at least 75% of those loans were done because the "fake" payment was the only way many were able to get into a home (CA!!!). Fast forward 1-2 yrs later..............prices of homes down 10-20%, mortgage balance up 10-15% due to negative amortization, original loan was already @ a 90% LTV/CLTV and no material change in family income. As Phil Rizzuto used to say "Holy Cow"!!

PSS - Want some real numbers on an original $600,000.00 5/6 LIBOR ARM 5 yr I/O loan @ 4.50% with a 2.25 margin and 5/2/5 CAPS?? Let's fast forward to the 61st month and first change period:

Original Payment:

1st 60 months I/O - ($600,000.00 x .045)/12 = $2.250.00/mth.

61st month Payment:

Rate - 4.956 (today's 6 month LIBOR index) + 2.25 (margin) = 7.206 rounded up to the nearest 1/8th - 7.25%

$600,000.00 @ 7.25%, P&I (I/O period OVER) = $4,093.06/mth.

Now we're not talking about borrowers like Physicians or Lawyers just coming out of Med or Law school 5 years ago who's income would rise dramaticaly over the 5 yr period of time whom could handle this 82% increase in payment IF they had to. Nope, we're talking about the average Joe who's income has barely changed over the last 5 years!!

HOLY COW!!!!!

In a message dated 12/11/2007 4:12:17 P.M. Eastern Standard Time, gene@xxxxxxxxxxxxx writes:

Hi Lenny,

Fosters. What have you observed in Jupiter?

Regards,

Gene