Why haven't adjustable rate mortgages been outlawed?

Question

I have called my senators 100's of times over the past 5 demanding that these adjustable rate mortgages be outlawed and they haven't done anything. In addition, I want 100% loan to value ratio loans outlawed. We can thank the states of California, Michigan, Illinois, and Ohio for the current over-hyped foreclosure situation.

Stupid headlines like Foreclosures up 68% are misleading as hell. Less than 1% of all the home loans nationwide are even in foreclosure.

The U.S. had one foreclosure filing for every 617 households in November, RealtyTrac said. That is meaningless. During the attack on the United States oil industry between 1984 and 1992 one in five homes were posted for foreclosure in Texas and no one cared. Banks didn't do anything to help.

I could care less how much homes have declined in California or anywhere else for that matter. Home values go up and down all the time. Rent homes and people who do not maintain they yards affect values more than foreclosures

Answer 1

The same reason that anything above 19% interest is no longer considered usury. No one cares, it's all about the bottom line.

Answer 2

Well, isn't THIS a lovely rant ? I shall address each of your rants individually. For starters there is nothing wrong with ARM loans, if used properly. They have been around for decades, and make perfect sense for those who know full well that they will sell before the loan interest rate increases.

Your stance on preventing 100% LTV loans is equally silly, given that the value of a piece of real estate is a fluid number.
"Value" at the time a mortgage is taken is ONLY the best estimate of a professional appraiser, but is not carved in stone anywhere. How do we determine value to enforce such a law ?

There is NOTHING misleading about the foreclosure statistics, since they ARE up drastically over previous periods of measurement. If you think that only four states are involved heavily in foreclosures, think again. I live in conservative Wisconsin, and foreclosures here are up as well. That's pretty much the situation in MOST states.

During the Texas situation, the foreclosure mess was related to one specific area, that being Texas. While Texas was struggling, most of the rest of the nation was doing quite well. I suppose the banks should have become charities for Texas because one specific industry got into trouble ?

Further, your contention that lack of yard maintenance and rent homes affect real estate values significantly is downright ludicrous. A yard can easily be made tidy and attractive. A failing mortgage can't.

Any other silly demands that you need addressed ?

Answer 3

They haven't been made illegal because they are voluntary contracts entered into between two consenting parties who each had time to review or negotiate the contract before it is signed. Nothing illegal has been done and many homeowners who have adjustable rate mortgages were able to pay them off or keep up with the payments.

By far the largest percentages of people facing foreclosure are losing their homes because of a loss in income or medical problems. Less than 5% actually lose their homes because of a payment resetting, although it may contribute if there is another hardship.

Other aspects of creating contracts are illegal, such as disclosing material facts, not using intimidation, not giving contracts to people who can not reasonably enter into them, etc. But when a husband and wife apply for a loan, sign disclosure statements that the rate will increase after 2 years, and state that they understand the terms of the contract, when they have not had the documents reviewed by an attorney or on their own, then problems will come up.

These specific mortgages aren't the real problem. More is going on in terms of lack of financial education, not understanding how contracts work and how to read them, and simple greed on the part of everyone involved. But anyone who was pressured into getting an ARM or fraudulently induced into a loan should have some legal recourse to have the mortgage nullified and the lender punished.

Just my thoughts on it.
ForeclosureFish

Answer 4

All respect due but.

You are an idiot.

How is it your duty to impose regulations on our market system? ARMs have helped millions of people purchase homes, the current issues going on are market fluxuation. Sure, some people are losing money but it isn't the job of the banks to inform all of these home buyers that do more research into their family vacations than they did into buying a home.

ARMs exist for a reason and a call from a citizen as ill-informed as you shouldn't be calling anyone to talk about outlawing them. Read up on free market theory, when you start regulating and outlawing anything that can cause harm to someone who doesn't do a basic amount of research, society suffers.

That being said, I recently called my senator about outlawing automobiles. Do you know how many people get killed by them every year? An absolute horror and it can be so easily prevented by outlawing all motor vehicles. I'm calling about outlawing planes, trains, and all objects that weigh over 50 lbs tomorrow!

Answer 5

Why would we outlaw such things and take the options away from businesses and people.

If you are going to ask such a questions would it not be more logical to outlaw signing an agreement you do not understand.

This mess is not because of the lenders, it is because of the folks that jumped in without understanding what they were doing.

I am trying to sell my house right now and suffering as much as anyone due to the market, but stupid people often get what they deserve. How hard is it to get someone who knows about such things to help you? Not very. So folks saved $100 in consultation and lost their homes - let this be a lesson for the person - not a reason to take away our freedoms.

Answer 6

without adjustable mortgages, millions of people would not have been able to buy their first house, which would have affected the entire ecomony for decades - less home building, less construction jobs, etc