What part of "adjustible" do these people not understand about Adjustible Rate Mortgages?

Question

There is a reason these people are SubPrime borrowers. They are irresponsible and stupid about managing their finances. That is why so many people are homeless. They won't pay their bills and spend their money on frivolous things like Computer games, liquor, drugs, designer clothing, and expensive cars.
I doubt that the MA nanny state will be able to help them at all, what do you think?
http://news.yahoo.com/s/nm/20070316/ts_nm/usa_subprime_fight_dc

Answer 1

from what i saw on the news only about 14% are behind, so clearly these deals have helped a lot of people that otherwise would not have been able to get their first home and I'm sure they are thankful. I don't think this will be the insane disaster that people claim since the banks will lose some money on these people, but they are charging a crazy high rate to the 86% that are paying on time. Sadly, these poor people will mostly likely lose their homes and have to start over. But this is the time to get in the market. When banks are foreclosing and selling, a smart person sees a great deal and is buying! the market is still steady in places like the Midwest and areas like NYC and Florida will pick up again in time. I don't think it's the banks fault at all for doing this since clearly the overwhelming majority of people were helped by it. If 70% of people with adjustable rates were in default, then that would be highly suspicious. Some people are always looking for the apocalypse to come and will point to anything as a sign of imminent disaster.

Answer 2

Most don't read the fine print, or understand the math. So, they get surprised when the rate (and their payments) goes up.

This is a standard "unfair surprise" argument, that goes back centuries in contract law. If the couple can meet the standard of showing that the lender failed to follow the laws regarding disclosure, then they will prevail.

There's nothing different about this than a hundred other contract examples over the past century. It's the same reason that certain parts of a contract are required to be in bold text, or capitol letters -- so that people have a fair chance to see them without them getting lost in pages of fine print.

Answer 3

It's not unlike the loan shark business, taking advantage of those in no position like you and me to get a mortgage on better terms.

As for the people who take out ARMs, they see only the short term benefit, without considering the long-term ramifications.

However, I think you went a little far in generalizing the "types" of people that apply for ARMs.

Answer 4

I think it's the adjustible part.