[AngelOfMurci]

FYI, FDIC insurance for brokerages are also only up to $250k in parked monies.
Better start reallocating funds to multiple brokerages.

 

[BLVE]

Our HR management/payroll platform uses(used) SVB.
Luckily, we do not.
Since they use SVB, I imagine they are going to be hit very hard.
All we are in jeopardy of losing is one week of payroll/taxes. Our payroll was taken out of our account on Thursday but no one has been paid yet. We have to wait a see if we have to turn on our Plan B to manually pay staff on Monday.

What is crazy is that only 2.9% of SVB accounts are under the $250K FDIC insurance threshold. A lot of companies are going to be feeling tremendous pain until this all gets straightened out.

 

[Luzifer]

That's a scary thought of a bank going kaput, here only 100K is insured and it's a scary thing to think to lose all the money over the 100. Not many banks have good interests and keeping all that cash in there is a risk. Is it safer if I see many of my customers have account there?

 

[GDF]

93% of the depositors in SVB are over $250k. This is just the beginning, we will see more banks go down. The FDIC does not have the funds to insure all deposits. We have a massive liquidity crises looming. This is about to get very very ugly.

 

[surfah]

Just like 2008. Coming soon

 

[A.L. Lanigan]

Round 2 here we go! Buckle up

 

[GDF]

Worse than 2008...Possible Great Depression level

 

[surfah]

Good luck to those taking 8% Car loans or HELOC.

HELOC abuse contributed to the Subprime mortgage crisis. Caught with your pants down when the Real estate market crashes. IMO playing with HELOC is as risky as Adjustable Rate Mortgage.

Let’s revisit this thread in 6-12 months after several posters currently espouse the virtues of Car Loans and HELOC.

I’m keeping the powder dry and ready to pounce if the car market dramatically goes south.

 

[A.L. Lanigan]

What makes this recession have the potential to be as bad as the great depression

 

[surfah]

If the 2023-24 market even gets close to 2008 it will be global catastrophe. Powell going to keep the pedal on Interest Rates, Banks and Tech hemorrhaging jobs and equity.

Currrent average HELOC rate is 7.75%. Car loans are 8%. 30 year mortgage is over 7%.

Going to get worse before it gets better.

 

[GDF]

HELOC abuse contributed to the Subprime mortgage crisis. Caught with your pants down when the Real estate market crashes. IMO playing with HELOC is as risky as Adjustable Rate Mortgage.

I will respectfully disagree with your statements. HELOC'S were/are only available to A/B Credit level consumers that had/have equity in the property. Subprime Mortgages were loans given to C/D Credit level consumers that allowed financing up to and sometimes over 100% of the purchase price of the home. Subprime mortgages were bundled and sold backed by securities that turned into junk leaving Billions upon Billions of dollars with virtually zero value creating the banks holding them to become insolvent. (for a simplistic explanation)
Adjustable Rate Mortgages IMO are a better option than a 30yr fixed Mortgage. Statistics show that over 70% of Home Buyers Refinance their Mortgages in 5yrs or less. Adjustable Rate Mortgages are fixed for a period of time 3/5/7yrs and then have an index and margin that controls the amount the rate can change on the anniversary date the mortgage was taken out. If the majority of homeowners refi there mortgage within 5yrs, why not get a 5/1 ARM that is fixed for the first 5yrs and has a lower rate and payment than a 30yr fixed? I have had a 3/1 ARM on the house I gave to my ex-wife and I don't believe I have paid over 4% since like 2004. The worst loans were the Negative Amortization Loans that Washington Mutual was known for among a few other lesser known lenders.
Again, a respectful difference of opinion. I am curious why you feel ARM's are so risky? I enjoy listening to others opinions that differ from mine, as I like to understand the opposing thought process.

 

[GDF]

If the 2023-24 market even gets close to 2008 it will be global catastrophe. Powell going to keep the pedal on Interest Rates, Banks and Tech hemorrhaging jobs and equity.

Currrent average HELOC rate is 7.75%. Car loans are 8%. 30 year mortgage is over 7%.

Going to get worse before it gets better.

I agree with your points here. Inflation and Interest Rates going through the roof, Assets plunging, an impending liquidity crisis which will cause the fed to start printing more money adding an atomic bomb to the situation. The outcome will be the flip to digital currency and the end of fiat currency when the new financial system ISO20022 is fully implemented globally.

 

[surfah]

I’ve seen first hand ill-informed acquaintances get murdered during the Great Recession with ARM’s.

Specifically overleveraged buyers trying to get into homes they couldn’t really afford.

Basically “ if you opted for an ARM because you were struggling to qualify for the loan you wanted with the fixed-rate loan, you could be in real trouble if the ARM ends up being even more expensive. “

In the current hyperinflationary environment I would be extremely leery of rolling the dice on an ARM knowing how aggressive Powell will be with a guaranteed 0.5 hike soon to come and more rate hikes in the future.

Regarding ARM’s “The big downside: Adjustable-rate mortgages can be really risky. By now, you're probably wondering why everyone doesn't get an ARM since they are cheaper and easier to qualify for.
The problem is, the ARM is adjustable. So while it may start out cheaper, it's not necessarily going to stay that way. In fact, if your interest rate adjusts up, your payments could become much higher. You could end up with substantially higher total interest costs over time than if you'd taken out the fixed-rate loan. And if you opted for an ARM because you were struggling to qualify for the loan you wanted with the fixed-rate loan, you could be in real trouble if the ARM ends up being even more expensive. You need to seriously think about the dangers of rates rising before you opt for an ARM, because it's not always possible to refinance or sell your house before the rate starts adjusting. Unless you're confident you could pay your mortgage even if your rate goes up -- and you're OK with taking a big chance on your loan costs being much higher than planned -- you should likely opt for the safer fixed-rate loan.”

 

[surfah]

Obviously Real Estate is regional and @GDF may be more suave than local buyers here.

It’s likely the consequences of ARM’s going bad are magnified in my region where starter homes are $1000000.

 

[GDF]

I understand your point to a degree but all adjustable rate mortgages are fixed for the first 3/5/7yrs then adjust based on an index and margin with caps on how high or low it can adjust after the fixed term. I owned a medium sized (60 employee) mortgage company as well as a title insurance agency for 15yrs and have done 1000's of loans, so my vast experience is what has drawn me to my explanation. Using my knowledge of how these loans work is why I chose that route on that home. Since 2004, the rate has adjusted both up and down and started in the low 3% range. At its lowest it went down to the low 2% range and at its highest was around 4%. If someone were to buy a home today on a 5/1 ARM, the rate wouldn't have an adjustment until 2028. We will be in a new world when that occurs and depending on where the financial world is at time, there will still be an index and margin that will determine the adjustment and there is a cap on how much it can adjust. It won't go from 5% to 10%or 5% to 2% as the index/margin/cap will control the adjustment.

 

[AngelOfMurci]

Round 2 here we go! Buckle up

DOWN GOES FRASIER! DOWN GOES FRAZIER!

 

[topcarbon]

ARMs are a great way to bridge loan to something long term and wait a bad period in the economy.
A lot of people buying with the thought of refinancing an ARM aren’t savy enough or diligent enough to refinance and then get hit with the higher adjustable.
For that home buyer that barely qualifies for a mortgage, and gets sold an ajustable to get that house they can afford usually ends badly if they do not plan for a rainy day.

 

[surfah]

Since 2004, the rate has adjusted both up and down and started in the low 3% range. At its lowest it went down to the low 2% range and at its highest was around 4%.

It won't go from 5% to 10%or 5% to 2% as the index/margin/cap will control the adjustment.

You say the rate over the Initial adjustment cap and Lifetime adjustment cap never varies more than 1% ie 3-2 and 3-4%.

My friends beg to differ with some rate increases of 3-5% during the Great Recession. That is catastrophic on a $2.5 million dollar mortgage.

My understanding

“Initial adjustment cap. This cap says how much the interest rate can increase the first time it adjusts after the fixed-rate period expires. It’s common for this cap to be either two or five percent – meaning that at the first rate change, the new rate can’t be more than two (or five) percentage points higher than the initial rate during the fixed-rate period.

Subsequent adjustment cap. This cap says how much the interest rate can increase in the adjustment periods that follow. This cap is most commonly two percent, meaning that the new rate can’t be more than two percentage points higher than the previous rate.

Lifetime adjustment cap. This cap says how much the interest rate can increase in total, over the life of the loan. This cap is most commonly five percent, meaning that the rate can never be five percentage points higher than the initial rate. However, some lenders may have a higher cap.”

So are we talking about potential 3-5% at the Initial adjustment cap and 5% or higher over the Lifetime of the ARM?

 

[surfah]

@GDF what is your professional opinion on HELOC? Do you risk stratify HELOC equivalent to ARM or a riskier vehicle?

 

[GDF]

You say the rate over the Initial adjustment cap and Lifetime adjustment cap never varies more than 1% ie 3-2 and 3-4%.

My friends beg to differ with some rate increases of 3-5% during the Great Recession. That is catastrophic on a $2.5 million dollar mortgage.

My understanding

“Initial adjustment cap. This cap says how much the interest rate can increase the first time it adjusts after the fixed-rate period expires. It’s common for this cap to be either two or five percent – meaning that at the first rate change, the new rate can’t be more than two (or five) percentage points higher than the initial rate during the fixed-rate period.

Subsequent adjustment cap. This cap says how much the interest rate can increase in the adjustment periods that follow. This cap is most commonly two percent, meaning that the new rate can’t be more than two percentage points higher than the previous rate.

Lifetime adjustment cap. This cap says how much the interest rate can increase in total, over the life of the loan. This cap is most commonly five percent, meaning that the rate can never be five percentage points higher than the initial rate. However, some lenders may have a higher cap.”

So are we talking about potential 3-5% at the Initial adjustment cap and 5% or higher over the Lifetime of the ARM?

I can send you my mortgage statements for the last 19yrs if you like