I'm old-fashioned about financing a home.  My first (fixed) mortgage in 1982 was at 16.5%.  Later on, I refinanced down to 13%, and after that again to 9%.  Now I have a home that's paid for.  

Holy Christ. For that much interest you probably would have been better off renting. My very first mortgage back in 1999 was 6.8% or something like that and at time I was thinking 'damn this is such a rip'. 16.5%..my god.

In any event my current rate on my place is 4.75% on a 5 year ARM. The brilliant part is that the ARM is about to expire (in august), but with the Fed's nice .75c cut (and the forthcoming .50c I speculate will happen end of January), mortgage rates have been diving to historical lows. For anyone in the market the next few months will be a once in a century opportunity to buy a house cheap as housing prices fall AND finance it for cheap.

I think it would be greatest irony if I refinanced my current 5 year arm into another 5 year ARM for the same rate or less with the same mortgage company I'm currently using.

Memory is a strange bell, jubilee and knell.

My first (fixed) mortgage in 1982 was at 16.5%. Later on, I refinanced down to 13%, and after that again to 9%. Now I have a home that's paid for.

That's fascinating to me, and it really goes to show how cheap credit drove the housing boom. My wife and I just got a fixed rate mortgage last summer for about 7.7% - and that wasn't a particularly good rate (the best rates at the time were about 6.7%, and a few years earlier they were even better than that). We had to get a non-standard (although not sub-prime) mortgage, because most of our income at the time was from inherited investment income (and for whatever reason, banks won't count capital gains or graduate student stipends as "income" - never mind that we get bi-weekly paychecks like everyone else.... go figure). We might have been able to get a cheaper ARM, but we knew better than to do that... and thank god, because I'm sure we'd find it nearly impossible to refinance now.

In any case, I'm glad we got the mortgage, but I can also see how easy the mortgage companies made it to game the system. All we had to do for the mortgage we got was "state an income". They made no effort at all to verify it - we just had to say what it was. The only disadvantage to that method was that they approved us for a relatively low amount, and our interest rate was about a point higher. We told the truth about our income, but there was absolutely nothing to prevent us from lying, and our "mortgage consultant" practically encouraged us to lie to get a higher amount (all in coded language, mind you), because, I assume, his commission was based on the size of the loan amount. Fortunately, we were putting about 50% of the price of the house as a down payment, so we didn't really need a huge loan, but nonetheless... People shouldn't have behaved irresponsibly, but the mortgage companies practically begged them to cheat and game the system. If it wasn't for the effect on the economy, I wouldn't feel bad at all that things are now coming back to bite them in the ass.

Ce n'est pas une pipe. C'est une signature.

I don't give much credence to the moral argument myself. In every collateralized loan there is a deal which basically goes "I'll borrow some money from you and pay you back at this rate. If I don't pay you back, you can take this collateral which is what I'm borrowing the money for". Thats the essence of collateral banking.

Now a significant piece of a bank's interest charge on a loan is to compensate them for the loans that will inevitably go bad. If the bank failed to charge enough interest to offset their risk, they need to fix that and charge higher interest rates in the future/revise their vetting procedures.

The implication that people who walk away from their home loans are somehow acting immorally or even fraudulently ignores the fact that walking away is a right embedded in the loan contract.

I think what we are going to see as a side-effect of the mortgage crisis is that  credit ratings are going to be revised to track people for much longer periods of time. The guy who blows off his loan now, might be surprised come 7 years from now when his bad loan still shows up on his credit profile.

Memory is a strange bell, jubilee and knell.

No, think of the couple of months rent you save!

(is 3fingerspointback)