3 ms·

ARMs were not the problem in 08. The problem in 08 was interest only loans and/or balloon payments. Borrowers were intending to refinance before those deadlin

by treis 4y ago

ARMs were not the problem in 08. The problem in 08 was interest only loans and/or balloon payments. Borrowers were intending to refinance before those deadlines hit but got stuck once values stopped rising. So they faced payments of 10s of thousands and/or their monthly payment was going to double or triple once they had to start paying principle down. In contrast, if your arm resets from 3% to 7% it's like a 50% increase in mortgage payments. That sucks, but manageable given that your salary likely inflated along with your payment.

ziddoap 4y ago
>but manageable given that your salary likely inflated along with your payment. Which, anecdotally, has not been true for myself or any of my colleagues (barring the ol' job switch raise). Wage stagnation is an extremely common problem in many countries and industries. Those that have gotten or negotiated for raises aren't getting raises that account for the record-setting inflation (at least in my country, which is seeing the highest rates of inflation in 30+ years)
hbosch 4y ago
>That sucks, but manageable given that your salary likely inflated along with your payment. Can I reside in a world where my salary doubles if my mortgage rate doubles? It sounds very nice.
- sokoloff 4y ago
  That's not the most analogous comparison; the most analogous comparison would be "where my rate of salary increase follows the changing interest rate on my mortgage". It's not that your $100K salary should go to $200K if your mortgage goes from 3% to 6%, but rather that your $100K salary should go to $106K instead of just $103K if your mortgage goes from 3% to 6%. Similarly, if your mortgage fell from 3% to 2%, you'd be pretty close to even if next year's salary went to $102K and likely in bad shape if it instead went to $67K.

3 ms·

ARMs were not the problem in 08. The problem in 08 was interest only loans and/or balloon payments. Borrowers were intending to refinance before those deadlin

by treis 4y ago

ziddoap 4y ago
>but manageable given that your salary likely inflated along with your payment. Which, anecdotally, has not been true for myself or any of my colleagues (barring the ol' job switch raise). Wage stagnation is an extremely common problem in many countries and industries. Those that have gotten or negotiated for raises aren't getting raises that account for the record-setting inflation (at least in my country, which is seeing the highest rates of inflation in 30+ years)
hbosch 4y ago
>That sucks, but manageable given that your salary likely inflated along with your payment. Can I reside in a world where my salary doubles if my mortgage rate doubles? It sounds very nice.
- sokoloff 4y ago
  That's not the most analogous comparison; the most analogous comparison would be "where my rate of salary increase follows the changing interest rate on my mortgage". It's not that your $100K salary should go to $200K if your mortgage goes from 3% to 6%, but rather that your $100K salary should go to $106K instead of just $103K if your mortgage goes from 3% to 6%. Similarly, if your mortgage fell from 3% to 2%, you'd be pretty close to even if next year's salary went to $102K and likely in bad shape if it instead went to $67K.