{"id":1889,"date":"2007-09-04T18:12:09","date_gmt":"2007-09-05T01:12:09","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1889"},"modified":"2007-09-04T18:12:09","modified_gmt":"2007-09-05T01:12:09","slug":"arms-look-scary-before-they-look-good-or-how-wall-street-dupes-the-little-guy","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1889\/arms-look-scary-before-they-look-good-or-how-wall-street-dupes-the-little-guy\/","title":{"rendered":"ARMs Look Scary Before They Look Good or (How Wall Street Dupes the Little Guy)"},"content":{"rendered":"

I don’t look real smart today<\/a>, do I ?<\/p>\n

\n

Mortgage rates in general took a fairly substantial dive during the previous week with longer term rates dropping double digits in most cases and some rates returning to mid-2006 levels. However, the Mortgage Bankers Association reported a spectacular increase<\/strong> in the interest rate of the one-year adjustable rate mortgage (ARM). <\/em><\/p>\n<\/blockquote>\n

Hold on just one second !<\/strong> Now is the time when you SHOULD be a contrarian. The alternative title of this post is the one you should read. Wall Street has always been ahead of the little guys and gals. They look into the future, and try to get money committed to best profit off of their forecast. If an annual ARM rate is rising above the fixed rate mortgage rate, Wall Street is trying to induce borrowers to lock up money.<\/p>\n

Why would anybody in their right mind do that?<\/strong><\/p>\n

Wall Street thinks rates are going to drop like a ball off of a table. They think the inverted yield curve we’ve seen is a precursor to a recession<\/a>. The inverted yield curve has indicated an impending recession some 85% of the time since the Civil War – which side would you bet on if this were Vegas?<\/p>\n

Nobody likes the R word. I’ve been sensitive to the R word since Bill Gross of PIMCO talked about the housing recession in late 2005<\/a>. He, and I, are more sensitive to the concept of a “housing recession”; we’re both in California. It’s estimated that close to 10% of the jobs in California are related to the housing industries be they Realtors in Rialto or a painters in Petaluma.<\/p>\n

Why the Wall Street shuffle with higher ARM rates? They want you to take the risk of a fixed rate so they can stick them in the MBS pools for a few years. They know those loans will sell at a premium in 12-18 months- when rates are dramatically lower. To continue the Vegas Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

I don’t look real smart today, do I ? Mortgage rates in general took a fairly substantial dive during the previous week with longer term rates dropping double digits in most cases and some rates returning to mid-2006 levels. However, the Mortgage Bankers Association reported a spectacular increase in the interest rate of the one-year […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,26,5],"tags":[],"class_list":{"0":"post-1889","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-lending","8":"category-real-estate","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1250,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1250\/a-farewell-to-arms-one-less-option\/","url_meta":{"origin":1889,"position":0},"title":"A Farewell to ARMs: One Less Option","author":"Brian Brady","date":"April 1, 2007","format":false,"excerpt":"Are Option ARMs the next casualty in the non prime mortgage meltdown war? Wall Street fired the shot heard 'round the world in the mortgage default war by demanding repurchases from subprime lenders. Lenders either closed their doors or waved the white flag and allowed the conquering army to annex\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1667,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1667\/the-800-pound-gorilla-in-the-corner-the-meltdown-of-the-wall-street-mortgage-market\/","url_meta":{"origin":1889,"position":1},"title":"The 800 pound gorilla in the corner – the meltdown of the Wall Street mortgage market","author":"Morgan Brown","date":"July 16, 2007","format":false,"excerpt":"As we go about our daily lives in the mortgage and real estate world; dutifully performing our job functions and taking the high road of customer enlightenment via blogs such as Bloodhound; we are faced with a very large gorilla looming in the corner of our workplace. 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While these factors might be contributing reasons, they are all byproducts from the underlying\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17897,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/17897\/where-have-all-the-buyers-gone\/","url_meta":{"origin":1889,"position":3},"title":"Where have all… the buyers gone?","author":"Brian Brady","date":"February 26, 2021","format":false,"excerpt":"If you work with home sellers, the pandemic has been good to you... VERY good to you. If you mostly work with buyers, the pandemic has been sheer hell for you. All of that may change in 2021.\u00a0 \u00a0If you spend 5 minutes reading what I am writing, you will\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-content\/uploads\/2021\/02\/BlackFriday-480x320.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":7557,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/7557\/a-few-thoughts-about-mortgages\/","url_meta":{"origin":1889,"position":4},"title":"A Few Thoughts About Mortgages…..","author":"Tom Vanderwell","date":"March 21, 2009","format":false,"excerpt":"Since I already sent an update out earlier in the week outlining what the Fed did and how it can\/will impact the economy and the mortgage markets, I\u2019m going to focus on a couple of other topics this time. 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