Jimmy Wrote:Do you guys have mortgages? If so were you affected by the sub-prime thing? If yes, how so. I don't quite understand what happened. Maybe your mortgages are structured differently than ours.
I have a small mortgage, but wasn't affected. I locked in a 15 year note about 5 years ago. I think interest rates were only about 4% back then.
The problem that they are having in the mortgage industry is the creative ways that lenders came up with to get people into larger mortgages than they could afford.
They offered low interest rates that gradually increased (arms) over a few years. Although it sounds gradual, it actually is astronimical. People had no idea that their monthly payments could double. They also offered "zero down, interest only" deals to get people into homes. Then after a few years, the prinicipal part would kick in.
These crafty methods of talking people into buying more than they can afford work if home prices are climbing a lot, interest rates are flat or declining, and if houses are selling. The problem was, none of that was the case. Home prices are decreasing, interest rates are skyrocketing, and houses are not selling. You combine all of those things happening at once, and add the fact that each causes the other to get worse, and you have a catastrophe. Which is what we have now.
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