Sunday, December 04, 2005

Thanks for all the feedback!

I will be answering as many of the questions as possible over the next few days. Some I have the answers to, some I do not. Unlike a lot of people, I will tell you when I don't know something, or where I am not an expert. Me blowing smoke up your a@@ doesn't help you get a correct anwer, and it doesn't help my credibibity.

It seems that people like the F@CKED borrower stories, so I will keep them coming. Goodness knows I have enough of them written down.

So stay tuned, and I will get to as many of those posts as I can!

Thanks for stopping by...


*****I made a quick post in the previous thread (asking for feedback) where I gave some "bullet" answeres to some of the questions. Check it out below.*****


Blogger Karen said...

Thanks for a great blog! I've learned a great deal, and I enjoy your insider's view.

In a previous entry you explained a bit about ARM loans, and I'd like to ask a question about something that wasn't clear to me in the entry.

What is the difference between 5/1 and 2/28 loans?

What are the benefits/drawbacks of each?


12/05/2005 6:43 AM  
Blogger AZgolfer said...


About five years ago I refinanced with the credit union to a 15 year mortgage. The rate was quoted to me as 5 1/2 but when I went to sign the papers it was 5 3/4 or something around that. When I asked about the difference the lady told me the rate always comes out a little higher. Did a get screwed? Also the apprasal was much lower that I thought and latter people told me that credit unions are more conservative. Also, the credit union still holds my load and has not "sold" it off to another company. The first mortgage that I had was sold almost right away, I think within the first six months or so.

Can you explain the differnce between a credit union and a bank mortgage and if there is any advantage of one?

12/05/2005 7:54 AM  
Blogger SoCalMtgGuy said...


2/28, 3/27, 5/25 are the designations used by "subprime" companies when talking about ARMs. First number is the length of the fixed period, the 2nd number is the time it is adjustable. ex: fixed for 3 years, adjusts for the next 27.

"A-paper" generally uses the 3/1, 5/1, 7/1, 10/1 terms. This means the fixed period is for 3,5,7,10 years then it adjusts. It is tied to a 1-year treasury index.

I hope this helps to answer your question.

12/05/2005 9:26 AM  
Blogger SoCalMtgGuy said...


Without seeing your document papers, and knowing the entire situation, I can't really answer your question.

BUT, I can tell you that there is a difference between RATE and APR. The APR (annual percentage rate) takes all of the fees (origination, processing, points, misc fees, etc.) and finds out what your real "rate" is.

If your rate is 5.25%, by the time all of the fees are added (nobody does loans for free) your APR will probably be about 5.75.

So, without my knowing any of the specifics, that would be my best guess for your situation.

I hope that helps...


12/05/2005 9:32 AM  
Anonymous Anonymous said...

hello possums,

here is a good article on option arms, margins, ect ..


12/05/2005 1:12 PM  
Blogger Karen said...

Yes, that does clarify things for me. Thank you for the quick answer! I appreciate your willingness to share your experience in the mortgage industry. What you've written is terribly frightening!

I feel trapped in this chaos, despite being in an enviable position. My husband and I bought a house in NorCal in 1998 and sold earlier this year when it tripled in value.

We moved east to another insanely expensive area, Maryland. But, instead of buying up, we decided to buy a comfortable townhouse in a great school district. We have what we need and we know we made a good choice, but the pressure to move up is intense. During our search for a house, we constantly had to reign in our agent. She couldn't believe that we were serious about buying down. We ended up taking a small 5/1 ARM (thus my question), because it had an attractive rate, and we knew that we could pay it off before it adjusted.

Now, six months later, we're watching many of our neighbors take crazy loans to buy large, single family homes. My husband and I think they're nuts! We'd rather live simply and bank the money than gamble on today's real estate market.

I wish I could say I sleep soundly at night, but watching our friends gamble on their future financial security is scary stuff. I worry for them.

12/05/2005 1:20 PM  
Anonymous Anonymous said...

You're smart! I like to think I am too! We sold our home this past summer, and we now living at our business (we have a very large manufacturing plant and converted a large unused office space into very cool living quarters), paid off all debt, sold our other investment property (w/ carrybacks, which I love)'s important to us, financially, socially, and spiritual to live within our means...we have the cash to live beyond comfortable, and don't worry about the real estate storm. And I'm a real estate agent...! But I'm losing business not only because of the slowdown, but because I refuse to lead buyers and sellers down the path to ruin...I'm cautioning everyone to be very careful...some clients leave me because I am not 'aggressive'...but I also gain clients that appreciate my pragmatic approach.
You can make an honest living at whatever you do if you treat people as you wish to be treated.
I know what people say and feel about r.e. agents, but I'm guilt-free...I've never earned a commission off of someone's misfortune or ignorance.
And this is a great blog....thanks!

12/05/2005 1:58 PM  
Blogger Karen said...

I hope we've been smart. A lot of our wealth is still tied up in real estate. As long as we live here, we'll be very comfortable, but if we need to move for whatever reason, we could lose out, too.

It was extraordinarily difficult leaving the west coast. We really loved living there! But, with every year that passed we felt more and more vulnerable to the crazy RE market, the potential for natural disaster (earthquake), and/or job loss (yeah, the tech industry!). Eventually, it just wasn't worth the risk anymore.

Interestingly, the people who bought our $550k house made less than $100k/yr, put only $15k down, and had no other significant savings. They recently completed a significant remodeling project, no doubt with a HELOC. I wonder what they'll do when the house of cards comes crashing down.

12/05/2005 2:26 PM  

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