uh-oh
market watchers are now preparing for the other shoe to drop because of the lovely loan products called the alt-a* or option arm** mortgages granted to the greedy bastards customers that took them. 60 minutes covered the story on sunday and it is presented below. when you take into consideration the current and predicted job losses, it becomes frightening.
now i understand why they put a ban on shorting financial stocks.
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* borrowers behind alt-a mortgages typically have clean credit histories, but some aspect of the borrower’s profile does include risk such as higher loan-to-value and debt-to-income ratios or inadequate documentation of the borrower’s income.
**option-arm mortgages with very low interest rates at the start of the mortgage but at reset after about 3 years with a sky rocketed rate (a payment could go from $800/month to $2000/month). this type of mortgage is typically for borrowers who want maximum payment flexibility or who expect to own their property for a short time period.
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