Has anyone heard about this?  What are the potential implications for the real estate market and is this a good or bad thing?

See this article from CNN - http://money.cnn.com/2007/11/30/real_estate/ARM_rate_freeze/index.htm?postversion=2007120309

e-Agent recently polled our agents regarding this issue, here are the results:

 Questions 1 & 2:

Questions 3 & 4:

Question 5 & 6 (open ended, see below):

Open ended answers from agents:

1. Crazy lending guidelines led to this issue! If the "funny" money hadn't been there to begin with...less homes would have sold.. home prices would not have over inflated and there would be less demand for "fuuny" money! It was overzealous investors wanting more returns for their money!  Wed, 12/5/07 8:00 AM 

  2. I am worried!!!  Wed, 12/5/07 4:46 AM 

  3. I've been handling shortsales in Austin, TX for the past 5 years and have only seen a small increase this year. I imagine the foreclosures will increase next year. Although markets in other parts of the country are taking a hit, according to the Austin American Statesman, "Austin's median price rose to $182,500, up 9 percent from September 2006. Real Estate experts attribute the jump to steady appreciation, rising home construction costs and more sales in higher price brackets. Central Texas' housing market is faring better than many markets around the country, thanks to a healthy economy fortified by strong job and population growth." When talking to other realtors in Austin, some of them top producers, October and November were very slow months. As they were for myself. But, December has taken off for all of us! Half of my business is helping investors find the perfect investment property for them. When the mortgage crisis hit, banks stopped giving loans to investors that they were used to . . . zero down, interest only, stated income . . . but I spoke with one bank today who is offering 10% down, stated, etc., on 30-year fixed at 6.3%. My investors are coming back. After reading all that is going on in other parts of the country, I'm thankful to be in Austin. Terry Moore e-Agent, Austin, TX  Tue, 12/4/07 6:38 PM 

  4. Your questionaire is poorly written. Whatever conclusions you may draw, they will be definitevely skewed. In most cases, these are not "yes or no" questions. For "I don't know", substitute "It depends". That being said, federal intervention will almost assuredly bring some undesireable results, but whatever they may be, federal intervention was predictable and the lending industry brought this upon themselves and the rest of us.  Tue, 12/4/07 6:33 PM 

  5. The government should not have anything to do with any loans on homes. They make or in this case did n ot make any rules for the klenders to follow. It is all about greed ! Someone somewhere will buy the homes. We have had to much playing with the market more is going to hurt more later.  Tue, 12/4/07 5:36 PM 

  6. It's a HUGE correction and lots of people will be affected. They based the entire theory on the average time people are in their homes of 3 years.  Tue, 12/4/07 4:21 PM 

  7. The more government is involved, the longer it will take for the market to correct itself. With the government's plan to freeze the index for adjustable loans, what will happen in future years when this freeze expires? In the future, rates may be even higher than now. So does the owner with a sub-prime adjustable mortgage get to keep their initial rate indefinitely? If so, how do I go about getting one of these loans?  Tue, 12/4/07 11:24 AM 

  8. The crisis is the result of the speculating (by investors and banks) in real estate that created the inflated prices. This is very similar to the speculating in the stock market in the 1920's- that resulted in a crash in 1929.  Tue, 12/4/07 11:23 AM 

  9. Builders with their own mortgage companies created a lot of this situation, too interested in approving loans with little or no down, buy down programs that weren't explained to the buyers. The lenders should work with homeowners, but some responsibility has to placed on the borrowers who didn't have a clue what the ramifications were to take out these types of loans and weren't prepared for tax payment increases, maintenence and normal expenses of homeownership.  Tue, 12/4/07 10:48 AM 

  10. Too many foreclosures NOW  Tue, 12/4/07 10:25 AM 

  11. #4 IS a KEY Question. I'm not comfortable how it is worded for you to get max clarity for this survey. It is an 'endless loop' question. WE ALL (RE/Housing Industry) share in the 'blame'. Even Borowers and Media. EVERYONE wants a piece of the homeownership pie IF they, personally, can make money. When chaos ensues, like now, people-in-general are looking for someone to be accountable. For the immediate time being, we need to stop the 'Blame Game', including and especially the Media and politians who want to create stories and political capital out of situations like this. Stop the Insanity. Create both short-term 'freezes' to allow cooler and wiser head to prevail, as well as those of us in the Real Estate & Mortgage Industries who work hard at our craft and who have alwasy put the Client's needs and best interests first; to regain our footing and create & enforce better tools, products, and programs that will stabilize and regenerate the Homeownership Model and Dream in our towns and states. Move Forward with great conviction and strong and wise mutual trust. All will be well once more!  Tue, 12/4/07 9:51 AM 

  12. Obviously the blame goes to consumers and loan offcers/banks etc. for this situation. Often real estate brokers are only going on what a lender claims a client can buy, but any Realtor worth his/her credentials should also caution folks buying at their upper limit if other factors in the life of the buyer are dicey.  Tue, 12/4/07 9:46 AM 

  13. First of all, teaser rates were associated with negative amortization loans, so although the rates might remain low, they are still having principal added to their loan balance if they choose to continue to pay the low teaser rate payment. I believe that greed got us where we are today and that it was a joint effort between the loan offer, lending institutions and the realtor. Who wouldn't want to buy a Cadillac at the price of a Yugo (and the income to only afford a Yugo which all apparently knew prior to the purchase). The problem here is that many people made millions at the expense of others and they are no longer in the industry and we are left to fix it and to pay whatever costs we must pay to get it fixed. Unfortunately, this will take a significant amount of time and money before it goes away. I believe that FHA needs to raise their maximum loan amount, ease up on their ratios (just a bit to allow greater numbers to qualify for their loan product); possibly allow for 3 percent discounts in rates compared to market rates and increase those rates to market rates over the next 3-5 years. Obviously, we would have to make specific requirements to allow the borrower to qualify for the reduced rate option. Now that mortgage insurance is also deductible, this should no longer be a deterrent for products with MI.  Tue, 12/4/07 9:41 AM 

  14. In my opinion, realtors and media drive the market.Granted, we all know that times have been tough but the people don't need to see it on tv,newspapers and the internet every single day to be reminded of how bad it really is. Even though it is a hot topic, this has scared the daylights out of buyers and now see the results of it. The only thing we can do now ifs have the fed drop the rates until we have a balance and wait another 12-18 months for all of the arms to expire. The market will than go through a major change for the best and we'll do this again in another 9 years.  

My concern is one of equitabiltiy. How can the governemt come in and say they will make the banks hold the interest rate for owner occupied homes but not investment homes? Investment properties were also bought during this over inflated market and are suffering the same consequences. Also why not address the fact that in many areas the property taxes have tripled which in Florida is a huge reason why people are having trouble paying the mortgages. What about a little reform from the government to take less money? They say oh they will look at raising the homestead exemption (which should be adjustable with inflation to begin with) but the poorest people are the ones who rent not own and the cost of the increased taxes are going to be passed on to them in the way of higher rents. When the government gets involved they rarely think things all the way through!!! Look at the Alternative Minimum Tax (AMT) problems we have now becuase they were too stupid to set it up to adjust with inflation!!!

I travel to South Calif often.  I see many Latino families who have worked hard for years to acheive the American dream.  With low interest rates they were able to achieve home ownership and I think many took advantage of the ARM.  I'm sure they understood excactly what would happen at the end of 5 years but just hoped and prayed they could keep their homes.  I think it is unfair now to force poor people like this out of their homes.  Owning a home is a huge part of the American dream and it should be obtainable for all people.  If our government needs to step in to make this happen then to me that is the govenments fuction.  All people here should be able to own and keep a home if they work hard. 

Dan-

Did the government state that this would only apply to owner occupied homes?  I must have missed that, if so, while I don't think it's fair that they are doing that, I can see where they are coming from.

The government is trying to bail out people who really need help, investors most likely are able to survive this real estate downturn, however homeowners may not be able to.  Further, investors most likely knew what an ARM was, where many of the people who recently bought a house may or may not have known what an ARM was and could have been put into a loan that they didn't know about or what would happen when rates reset.

mdoug54@msn.com-

I would like to agree with you that people knew what would happen at the end of 5 years, but I don't know if they did, especially some of the latino families.  I feel like many people were caught up in the rush to buy a house because it was "if you don't buy know, when will you be able to afford to buy" and people just signed whatever they were told to to get the house.  That doesn't mean that the consumer should be bailed out, they should have done due diligence and learned what they were signing, but I believe many may not have been told about rates resetting, etc.  I personally think the banking/mortgage industry is to blame for the situation we are in now.

My 2 cents...

We just completed our consumer part of this survey and the results were very interesting.  Consumers and real estate professionals clearly have a different view of what is happening, what should happen, who should or should not get involved and what the future holds.  Here are the results from consumers who took the survey:

1. Not selling my house because I won't get the equity I've put in it for 25 years.  Fri, 12/7/07 4:18 AM   

2. I think like all things that are too good to last that communication between all parties should be clear about what is going to happen. The customer should be an informed buyer (learn about it) real estate agents should not show something outside a person's comfort zone of price...the customer will be back for something larger if there is a need. The lending institutions & officers should know the silver lining doesn't always hold. Just a fact of life. So, I think all to blame and no one in perticular. People took a gamble...either ignoring or accepting the risks and consequences. There are also unscrupulas people out there - no matter what - who will try to take advantage of anything where money is involved.  Thu, 12/6/07 9:41 PM   

3. I think the lenders should tell the truth and now lie to people about thier mortages.  Thu, 12/6/07 9:24 PM   

4. It's the lending institutions and the consumers fault for getting into this mess. Mostly young people, I am sure, buying houses, lending institutions talking them into a very low interest rate for a few years, and just paying interest on these loans, letting them choose the payment they want, and then adding the additional interest and all the principal of the loan, you end up owning more than you gave for the house in the first place, and most young couples do not understand this, they are just interested in a low payment each month. And the lending institutions, shame on them, giving loans to people they know can't afford them in the first place, without any verification of income, all of this was bound to happen. Just like teaser credit card companies, low interest, and if you are late one month, then it's 25% or more, plus the low interest is only for a few months and then goes up and like the home loans, you never get them paid off at all. All the subprime loan companies need just what they got, shame on them for ripping people off anyway. We wouldn't be in this mess if it wasn't for the loan companies trying to get rich, or should I say, RICHER!!!!  Thu, 12/6/07 2:34 PM   

5. With the freeze it should prevent the need for short sales and slow down the foreclosures. Which ARM's are only part of the problem until we get a handle on letting JOBS leave the USA and Washington (Pres. Bush and His party) encourge it by lowering are tariffs and promoting free trade with only the US opening it's market up while the Far east close theirs. If we had jobs ARM's would not be a problem. With out jobs it will not matter what interest rate we have evrybody loses. We need to quit worrying about the world and Pres. Bush war and take care of USA.  Thu, 12/6/07 2:31 PM   

6. HELP!!!!! The self-employed that have equity in their homes and know bank will touch them.  Thu, 12/6/07 12:50 PM   

7. I think people are greedy and have a sense of entitlement..that they can have a home instead of waiting until they can actually afford to buy a house.. and lenders were like sharks in the water !  Thu, 12/6/07 10:21 AM   

8. Let's get Bush out of the whitehouse, and Cheney too, then maybe the middle class will have a chance to survive. tax cut for the filthy rich(how sick)Norm  Thu, 12/6/07 9:20 AM   

9. The lenders have been allowing all lies and overstatement of income and just allowed this to happen.Real sales estate salespersons and broker joined the party.Lenders who make the biggest profit allowed this to go on and on.If they dispute this we will know how big of liers they truly are. At this point we say ohhh it just happened. They had all the experence and knew what they were causing but greed allways seems to win.  Thu, 12/6/07 8:25 AM   

10. governmeent get out of the way. The more the government gets involved the worse the situation gets. The gov intervenes to save a few short term which causes more harm long term.  Thu, 12/6/07 7:49 AM 

  11. banks and mortgage companies have always penalized the middle class one way or another. when a citizen has bad credit score,usually due to late payment , they attack us with High Interest rates.It doesn't matter one's good credit HISTORY, just that damn Credit Score number, which we all know decreases everytime you apply for credit.Which by the way is so pathetic. My point being, If the lending companies think we have bad credit due to not making payments on time, they increase interest making payments even higher. One would think that a citizen could much easily make a LOW PAYMENT on time than a HIGHER PAYMENT. But as everyone Knows, it is us Hard Working middle class that gets stuck all the time.

The only area consumers and agents seem to agree is question 5.  Feel free to add your two or three cents!

Thank you