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  • From: Gene GeRue <genegerue AT ruralize.com>
  • To: "homestead AT lists.ibiblio.org" <homestead AT lists.ibiblio.org>
  • Subject: [Homestead] Real estate financing, July, 2006
  • Date: Sat, 22 Jul 2006 13:01:13 -0500



Re-refinancing, and Putting Off Mortgage Pain

By VIKAS BAJAJ and RON NIXON
Published: July 23, 2006

It is the latest twist in the gravity-defying world of the high housing prices and exotic low-rate mortgages: As monthly payments on adjustable-rate mortgages are starting to balloon, many Americans have found a way to put off the day of reckoning.

They are refinancing with new adjustable-rate mortgages that keep monthly payments low ­ for now, that is, though their payments will likely rise even higher in the future.

“Some people would say I am a little crazy,” acknowledged R. Lance Perry, 42, of Danville, Calif., one of the new breed of people refinancing their mortgages. But faced with a sharp increase in his monthly payments and a need to take cash out of his home, he refinanced earlier this year to keep his payments the same.

By the time the rate goes up, he figures, his income will have increased enough to cover the higher payments, he will have refinanced again or he will have moved.

Like Mr. Perry, millions of Americans have turned to adjustable-rate mortgages, or A.R.M.’s, in recent years to afford a home as prices soared. Typically set at artificially low rates in the first years of the loan, these mortgages are then reset at the prevailing interest rates. For borrowers, the bet was that interest rates would remain low.

Now, the first big wave of the mortgage boom is cresting as more than $400 billion worth of adjustable-rate mortgages, or about 5 percent of all outstanding mortgage debt, will readjust this year for the first time, according to Loan Performance, a research firm. Next year, another $1 trillion in loans will readjust.

Yet instead of paying more now, many borrowers are refinancing into their second or third adjustable-rate mortgage, loan data indicate and industry experts confirm.

So far, the number of borrowers refinancing this way is relatively small ­ several hundred thousand in the estimate of the credit ratings firm <http://topics.nytimes.com/top/reference/timestopics/organizations/f/fitch_ratings/index.html?inline=nyt-org>Fitch Ratings ­ but mortgage industry officials and analysts expect the numbers will surge next year. In doing so, these borrowers are pushing out any eventual shock of higher payments by another two or three years, if not longer.

“They get another two- or three-year hybrid with a low introductory rate to keep payments down,” said Frank E. Nothaft, a vice president and chief economist at <http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=FRE>Freddie Mac, the mortgage buyer. “They’re trying to put it off forever, which is O.K. as long as interest rates are low. But when they start to spike, then it’s going to be more problematic.”

For now, this mini-refinancing boom is assuaging fears that rising interest rates and higher monthly payments would drive some borrowers into foreclosure or force them to scale back sharply on other spending. As a result, consumer spending may hold up better than some economists had thought.

But the refinancing also represents a doubling-down on a bet that housing prices will continue to rise on the West and East Coasts and in other hot markets. If the value of the home falls closer to the amount of the loan, that could curb the ability to refinance, and may prompt the homeowner to either invest more in the home or to sell it.

Still, borrowers like Mr. Perry say the loans make sense because in a few years they plan to move to another home, earn more or refinance again, often using the same assumptions they made when they took out their earlier loans.

With his new loan, his third adjustable-rate mortgage, Mr. Perry, a former technology project manager, cashed about $200,000 out of his home’s equity and is investing it into his four-year-old financial planning business. “I could have sold my house and made my family move,” said Mr. Perry, 42, who lives with his wife and a 3-year-old son in Danville, about 20 miles east of Oakland. “But I didn’t do that. I said, ‘Look, I want to start a new business,’ and this product allowed me to do that.”

The complete article is at:
http://www.nytimes.com/2006/07/23/business/23mortgage.html?ei=5094&en=48d3badc80108762&hp=&ex=1153627200&adxnnl=1&partner=homepage&adxnnlx=1153590980-vrbHhIYb/3iVZhgPkN5Z+A
From don.bowen AT earthlink.net Sat Jul 22 14:30:20 2006
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Subject: Re: [Homestead] Real estate financing, July, 2006
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At 7/22/2006, you wrote:
By the time the rate goes up, he figures, his
income will have increased enough to cover the
higher payments, he will have refinanced again or he will have moved.

Good luck. According to the most recent figures middle class incomes have
not kept up with inflation. Most of the wage increases so often touted
have gone to the upper 2% of wage earners. Middle class buying power has
remained stagnant while lower class buying power has shrunk. This is
evident in the negative savings rate as buyers struggle to maintain levels
of consumption. Increased energy costs are just now working their way
through the economy and will further erode buying power.



Don Bowen Awl Knotted Up KI6DIU

http://www.braingarage.com

My travel journal
http://www.braingarage.com/Dons/Travels/journal/Journal.html

I am omnivagant.
From intuit AT teleport.com Sat Jul 22 15:35:25 2006
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From: "Linda" <intuit AT teleport.com>
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Subject: Re: [Homestead] Real Estate/Bubble/Hardship Case
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Van Dell, thanks much for the information. If the weather isn't *still* up
into the 100*s I'll head to the court house monday, and check w/the county
laws. At least I will know how to present myself when asking my questions!
----- Original Message -----
From: "VAN DELL JORDAN" <vdjor AT yahoo.com>
To: <homestead AT lists.ibiblio.org>
Sent: Saturday, July 22, 2006 8:24 AM
Subject: Re: [Homestead] Real Estate/Bubble/Hardship Case


Linda,

I don't know about your county but our zoning laws
would allow us to use any size desired. OH wait a
minute....we don't have any zoning laws. I guess that
was a cruel thing to point out.

Seriously, make decisions based only on what your
local authorities tell you. Each jurisdiction has
its' own requirements unless their is a statewide code
When you are told something find out what the
authority is. Is it specifically written that way? or
is that the individuals interpretation? Sometimes
their are exceptions or variances so ask those
questions if things aren't looking good.

You may have guessed that was one of the things I did
in my time as a city bureaucrat. Instead of saying
this is what you need to do, I preferred to find out
what they wanted and tried to find a way to do that
and still make it legal. Not all public employees
share that attitude but most are cooperative if
approached in a reasonable manner.

Van Dell

--- Lynda <lurine AT softcom.net> wrote:

> Call your local planning department and building
> department. Tell them you
> want the codes for your particular area and all the
> specifications, forms
> for permits, etc.
>
> We looked into getting one for our son. I know the
> resale value of these
> things is pretty good. I've seen them for sale for
> the same price they sell
> them new. Also, a lot of the manufacturers have
> financing available.
>
> Lynda
> ----- Original Message -----
> From: "Linda" <intuit AT teleport.com>
>
>
> > Lynda, thanks! I will tour the site. But I still
> need to find what's the
> > largest model the county will allow. And if too
> expensive, as I will need
> > to
> > make the purchase, maybe I can find a used one. I
> wonder if the county
> > would scream if we went the way of a yurt?
>
> _______________________________________________
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>

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