Remember Me
forgot your password?

California Adjustable Rate Mortgage. Has the Love Affair Ended? if Not, it Certainly Should

California mortgage consumers absolutely love adjustable rates mortgages like the pick a payment and option ARMs. Maybe it was not so much love but some sort of cult like following. You had to get one or you were a loser.

But now these folks are realizing they may have been a loser for getting one. I have talked to so many people from California over the past 3 years. These people had good jobs, made good money, and all told me the same story.

They got caught up in the home buying craze just like everyone else across the country. The difference was in California, adjustable rate mortgages were just about the only loan you used. Strangely, it was not just the loan officer pushing an ARM, it was their peers.

They not only told these people who were their co-workers, friends, and family to buy a house or refinance with one of these pick a payment or option ARMs, they told them to buy a second home using one. And then the kicker, they could state their income to buy a much bigger house than they could afford. If you are investing, then you might as well invest big right?

They would not leave them alone about it either. If these people went out and found someone like myself to explain the dangers of these loans, their peers would ridicule them back at home or the office.

Why would these so-called helpful peers be so over zealous about this mortgage? My theory is Californians got a taste of something with the tech bubble. Even though most lost everything, they had it for a while even if it was only on paper. They needed something else to get that back and they looked to the real estate market and these adjustable rate mortgages to get it. It is like peer pressure. If you are doing something bad you want to take others with you.

These folks were told by the loan officer, their co-workers, and friends and family that the market would always go up and they would not have to worry about the payments. Just make the minimum payments every month and sell to take your profit when the time is right.

If you do not know by now, the minimum payment on those loans does not even cover your interest. Your loan balance grows every month. So, the balance is growing and the market is declining and they are struggling to make even the minimum payments because they used income they didn’t have. So, this isn’t shaping up any better for them than the tech bubble.

A California adjustable rate mortgage was also used by quite a few drug dealers. Yes, drug dealers. These guys would pick upscale neighborhoods all over California and use a pick a payment or option ARM to buy a house. The minimum payment was less than rent and they didn’t have to worry about the landlord showing up unannounced.

Once they got into the property, they completely gutted it and the whole thing was used to grow marijuana. It seemed perfect with massive square feet and every inch growing pot. It was in such a nice neighborhood that no one would suspect anything.

But eventually many of these drug houses were raided and shut down. And left were condemned houses and mortgages in foreclosure. These loans were just too easy to get. Even a drug dealer could get one! It had to end.

Right now the COFI is going up and that means so is your interest rate. Also, these loans are set to recast in five years. The bulk of the California adjustable rate mortgages were originated in August 2005. In August 2010, your payment will go way up. But that may not be the only thing to worry about. What will the housing market in California be doing by then?

Good Luck!

Rob Blake

Rob K. Blake, author of the BUILD System, Adjustable Mortgage Rates created a mortgage calculator called "No Cost" Mortgage Software- Save $-No Refinance! Click link for more California adjustable rate mortgage

Rate this Article: 5 / 5 stars - 1 vote(s)
Print Email Re-Publish

Add new Comment



Captcha

  • Latest Mortgage Articles
  • More from Rob Blake

New Wells Fargo Mortgage Refinance and Modification Options

By: MPetrone | 16/11/2009
Wells Fargo mortgage refinancing and modification is now easier and better for millions of homeowners. This is because of President Obamas $75 billion mortgage stimulus program. Using this program and Wells Fargo, a homeowner can get lower mortgage payments, and save a lot of money. Here is how it works:

Repossession and Bankrupcy

By: Steve Thatcher | 16/11/2009
If you cannot afford your mortgage payments, and you feel that you may have to hand the keys to yor property back, you need to know how any shortfall affects you. Here we explain what you can do.

Mortgage shortfall and bankruptcy

By: Steve Thatcher | 16/11/2009
If you have had a house repossessed, or handed back the keys, the chances are that when the house is sold, there will be a shortfall on the amount needed to repay the mortgage. This needs to be dealt with and bankruptcy is one way to do this.

Best Online Mortgage Loan – 7 Secrets for Home Equity

By: hardeepsingh | 16/11/2009
Usually you are taking a little part of your fairness each month and rotating it into a tax derivation. If you did not sort out this, all of your gratefulness would be safe and sound up in fairness.

How to save Huge Dollars in Refinancing Your Mortgage –

By: runs | 16/11/2009
If you can properly refinance then simply you can win and save huge no of dollars but if you do not know the pros and cons then you are in deep trouble and ultimately ends up in another debt trap. Because some mortgage lenders are there who will simply try to put you in their trap and suck your money. Simply try to understand the process and go for that without any hazards.

Top myths about bankruptcy

By: Richard Scott | 16/11/2009
It’s important that you know thy enemy. If you don’t, you might fall for some of the oldest con tricks in the book. Bankruptcy, much like other processes, has many myths that surround it. There are many urban legends that either entice people or scare them off. Here are a few of the more common bankruptcy myths.

First Time Home Buyer Stimulus: Are You Ready to Claim Your Tax Credit of Up to $8,000?

By: Safiur Rahman | 16/11/2009
Did you know that first time home buyers can get up to an $8,000 tax credit from the federal government towards the purchase of a new home? Did you also know that the deadline for qualifying was recently extended? If you are wondering if you qualify for the credit and how to go claim it, you are in the right place.

Homeowner Affordability and Stability Plan

By: MPetrone | 15/11/2009
The “Homeowner Affordability and Stability Plan” is a $75 billion program which was enacted by President Obama earlier this year. This plan will help struggling homeowners get affordable monthly mortgage payments by offering them new refinancing and home loan modification options. Using this plan, an estimated 8 million homeowners can get help with lowering their payments, getting better interest rates, and avoiding losing their home.

Mortgage Mistakes Cost Home Buyers Time and Money

By: Rob Blake | 13/11/2009 | Mortgage
Many home buyers make a series of simple to prevent mortgage mistakes that cost them $1,000's each time they purchase a house. We will discuss the costliest home buying mortgage blunders in this article.

Big Banks Dominating The Mortgage Market With Media Spin

By: Rob Blake | 12/11/2009 | Business
Mega banks are attempting to dominate the mortgage market through media spin of the mortgage meltdown. Laying the blame for the crisis at the feet of mortgage brokers is working to turn consumers against the brokers.

How Do You Beat a Bank?

By: Rob Blake | 27/09/2008 | Banking
You do not play. Once they get their hooks into you it is pretty tough to break free. But they make it so easy right? Open this account here, get a Home Equity Line of Credit there and before you know it you are living a lifestyle off credit and not earned income.

The 5 People You Should Never Talk to About a Mortgage

By: Rob Blake | 25/09/2008 | Mortgage
When you are out shopping for a mortgage, where do you get your information? Who do you listen to? These are the 5 people you should never listen to when shopping for a mortgage.

Your Home, Your Credit, and Your Divorce

By: Rob Blake | 28/02/2008 | Divorce
Divorce is one of the most horrible things a person can endure. There are a plethora of books and support groups out there that deal in the emotional aspects of divorce but what about the financial aspects…especially if you own a home.

Is There Hope for Selling your Home?

By: Rob Blake | 18/01/2008 | Real Estate
It is not good enough to simply stick a sign in the yard and call that “selling your home”. You have to compete with new construction and all the existing homes for sale. And if that wasn’t enough, housing prices are dropping almost everywhere. So, what is the plan?

What is Stated Documentation for a Mortgage?

By: Rob Blake | 10/01/2008 | Mortgage
Stated documentation has received a bad rap lately because of the mortgage meltdown. In actuality, stated documentation is an extremely helpful tool for self employed people who need a mortgage.

Submit Your Articles Free: Signup
Article Categories




Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.14, 6, w1)