From JibJab…

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Welcome to the Arizona Mortgage Guru blog, a great resource for all your home financing needs. If you're new here and like the content, you can subscribe to my RSS feed to get regular updates on all things related to mortgages. Thanks for visiting.

Tags: 2008 elections, fun, jib jab
Categories: Humor and Fun
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I’m out taking a few days off. So, happy July 4th everyone:

photo credit: The Lone Cypress

And of course if you’re in the UK happy National Kissing Day (which happens to be on the 6th), but I won’t be blogging then so….

photo credit: madmonk

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Negative amortization was always controversial. Option ARMS (Pick-a-pay) always have had a negative amortization feature. In fact this loan has always been World Savings bread and butter. For the financially savvy person this loan makes complete sense. It has features which allows you to lower your taxable income, decrease your cost of funds over the long term and if used with a carefully calibrated investment strategy allows you to maximize returns to the max. Within this context negative amortization is a well accounted for risk and balanced by high returns. Even if on a short term basis you ended up with some negative amortization, over the long term, you would come out ahead.

The problem is the average consumer is not tremendously financially savvy. And therein lies the problem. When option arms were marketed to the average Joe as a financial vehicle, loan originators who themselves are not tremendously financially savvy saw an opportunity to sell more house for lower monthly payment. I’m not trying to put the onus solely on the originator here either. I am of the opinion that the head of every bank in the United States fully knew what they were selling to the average borrower.

I remember a borrower a few years ago who insisted beyond any reasonable persuasion that he wanted to be in such a loan. He said that the payment on the 5/1 ARM I was proposing was to high and he wouldn’t’ be able to afford the house after a few years. However, with the option ARM a different lender had proposed he would be “comfortable”, so if I didn’t give him a similar option he was going to go with the other lender.

This borrower had no business being in an option ARM. Not only was he relatively financially unstable, he was trying to live way beyond his means, counting on future income and future equity to compensate for the short term loss. This was never the market for the option ARM and these types of borrower had no business being in this type of loan. In fact I wrote a post back in 2005 warning borrowers about the dangers of the option ARM. I wanted to remind folks that despite how things were being advertised as a borrower you are still obligated to pay back the full loan amount with any accumulated interest.

And it is because of stories of such borrowers over the past few years that today we sit where we are. Today, Wachovia, one of the largest underwriters of option ARM’s pulled the plug on these negative amortization loans. Here is the news clip from Fortune magazine:

Wachovia (nyse: WB - news - people ) announced Monday that it is pulling the plug on it’s Pick-a-Pay program. The pay-what-you-will exotic loan offerings weren’t exactly subprime –the borrowers were a bit better-heeled Alt-A types– but the default rates on the loans have been much higher than expected and have been driving the lender’s losses.

The loans gave borrowers the option of paying several amounts each month, including low payments that led to an increase in the principal amount of the loans.

Not only did they stop the program they also have said they’ll waive the prepayment penalties on these loans as well. Most option ARM included three year hard pre-payment penalties. So whether you sold or refinanced the loan within the first three years you had to pay a prepayment penalty. With the fall in home prices adding to negative amortization more than they had figured things are not looking good that the banks can make money on these. So, Wachovoia took a long hard look and decided to cut their losses. According to Housing Wire:

Wachovia also said it will waive all prepayment fees for borrowers looking to refinance out of an option ARM, a clear indication of the stress borrowers in such loans are now facing; the bank recently hired Goldman Sachs Group Inc. (GS: 174.90, +0.19%) in an effort to help it figure out what it should do with the Option ARM loans on its books.

As you can tell it’s not just the consumer who is in pain here, Wachovia is hurting too.

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Categories: Arizona, Congress and Government, Humor and Fun, Interest Rate, Mortgage Roundup, Mortgages, Real Estate
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This was a volatile week for stocks and things are not looking very good. Everything seemed to be pointing down - except of course long term mortgage rates and oil prices. Both are on a gradual upward trend. The Dow is now down to September 2006 levels. With all this bad news, financial experts were all over T.V. trying to reassure nervous investors today.  Here is a screen shot:

Source: Mish’s Global Economic Trend Analysis Blog

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Tags: bear market, financial experts, markets
Categories: Humor and Fun
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…. Young Hillary Clinton!

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Tags: funny, hillary clinton, younger
Categories: Humor and Fun, Uncategorized
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When I lived in Madison, WI I used to read The Onion every tme it came out - since it was distributed freely on the UW-Madison campus. It was the only way to live through the Clinton scandals - seriously. Some of the stuff they came up with during those years was truly classic.

Well now they have stuff online and even have videos and I go on their website from time to time to check things out. Here is one that was kind of thougth provoking for me. I guess the message of this is clear for business owners. Innovate or vegetate!

The Onion at its finest:

Historic 2018Blockbuster2019 Store Offers Glimpse Of How Movies Were Rented In The Past

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This is pretty funny. She does a good job explaining things to everyone:

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Tags: funny, gnooze, humor
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Dear Readers,

The FHA Mortgage Center is running a blog contest and I’ve entered the contest. If you believe The Arizona Mortgage Guru has consistently provided you with quality content then please consider voting for this blog. All you have to do is click on the thumbs up button in the side bar under “Vote for AMG”. —to side bar—>>

I do not run this blog to win online beauty pageants or, to be known and heard about in the blogosphere. The focus of my efforts is to provide you the ready with valuable content as you navigate the complex real estate financing market.The quality of e-mails I receive from you is a testament to that endeavor and is sufficient reward for me and my business.

But, if you should so feel inclined please vote for me.

Thanks,

Shailesh

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Tags: Blog, Contest, FHA Mortgage Center
Categories: Bloggers, Blogging, Humor and Fun
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In more detail:

The reaction at home: “as soon as man gets used to one thing, by golly they want to take it away from him…..”

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Tags: 1930s, telephone, user guide
Categories: Humor and Fun
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So everyone is talking about the lights that appeared over the Phoenix sky last night. The strange thing is the lights hung in the sky for a while and didn’t appear to be moving. AZCentral has a sideshow of pictures and a video of the lights for those interested.

Talk radio is abuzz with those who saw it. I personally didn’t see it but here are some eyewitness reports form the local radio KTAR:

“From my position, it looked like they were just hanging, not moving at all,” said one man, who called 92-3’s “Gaydos After Dark.” He said he “absolutely” saw something.

A woman caller said, “It looked like four red tower lights, but it was pretty high up in the air. I called my husband and he said, `Get home, what’s wrong with you?’”

A man in north Phoenix told CBS-5: “They were about 3,000 feet high, approximately. They looked as though they were kind of hovering or floating from west to east, very slowly. They were up there for 15 or 20 minutes.”

Those who saw them said the lights were visible about 13 minutes before moving off to the east.

I’m not a conspiracy theory type person. Nor am I one to think that we have been visited - yet. But, this is kind of strange. However, if these are indeed alien visitors, I want to welcome them and make peace with them so we can live together in harmony! Maybe they are interested in buying some of our real estate? That to me is great news!

However, we currently do not have an alien loan program. Despite this, the Phoenix market does offer some excellent deals for buyers who can make cash offers. Once you establish some degree of US credit, we can certainly look into refinancing you into a suitable loan program, and help you leverage your assets with this debt to build long term wealth. Unless of course all you want to do is just enslave us and take over our planet.

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Tags: aliens, arizona, lights over phoenix
Categories: Arizona, Humor and Fun, Phoenix
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