How the Fed Could Revive the Market for ARMs

by Admin 4. December 2015

Below is an excerpt from an article that appeared in National Mortgage News by Brad Finkelstein

December marks seven years since the Federal Open Market Committee cut the target for its benchmark federal funds rate to nearly zero.

The Great Recession technically ended six months after the Federal Reserve's dramatic interest rate cut, though to say the subsequent recovery has moved at a glacial pace would be an understatement.

But as a meaningful economic recovery appears to be finally taking hold, all eyes are on the FOMC amid speculation that it may soon raise rates. That watershed moment, whenever it comes, will necessitate a re-evaluation of many aspects of the "new normal" that have taken hold since the Great Recession.

Case in point: the adjustable-rate mortgage. The product, popular during periods of rising interest rates and home prices — and vilified for contributing to excesses that precipitated the housing crisis — has fallen out of favor among lenders and consumers.

But ARMs may soon be ready for a revival, albeit with tighter regulatory restrictions and a re-calibration of longstanding assumptions about who the product is best suited to serve.

Lenders are already seeing the beginnings of renewed interest in ARM loans. Even exotic variants, like the option-ARM, may have a role to play with the right consumer. "I believe adjustables will make a comeback. "The reason they haven't as of yet is because fixed rates have been so low for so long," said Dave Jacobin, president of 1st Mariner Mortgage, a subsidiary of Baltimore's 1st Mariner Bank.

When FRMs do hit 5%, Jacobin predicts ARM volume will pick up, "but nothing dramatic." Others agree. "But there is a market for ARMs that makes sense," he added.

For example, if a borrower intends to stay in a house for less than five years, a 5/1 ARM offers a lower rate than a 30-year loan and the rate won't adjust before the borrower is ready to move. Even if the borrower stays in the home longer than planned, there are caps on how much the interest rate can increase.

Now, as a new market for ARM loans may be emerging, lenders say they're mindful of the lessons learned during the crisis. "I want to make sure that any borrower I put into that product fully understood the ramifications of the upside and the downside," Jacobin said. Education is the key to bringing the ARM loan back to the mainstream, said Jacobin.

Salespeople need "to make sure they explain every nuance and detail to their customers, describe the worst-case scenario, and make sure the borrower is comfortable with it, and it is not just something where they can get them into a property so they can get a commission."

"It's much more important — and it will benefit them — they make sure the adjustable-rate mortgage products are given to people who it makes sense for them to take it. Frankly that will lead them to a better reputation, more referrals and everybody wins," he added.

Read the full article at NationalMortgageNews.com.

Charity Donation with Every Withdrawal

by Admin 10. June 2010

There is a clear, growing trend of organizations trying to figure out how they can incorporate charitable models into their offerings.  Skimming the web, as I do each morning, I found an interesting article on a start-up whose proposed model is to take part of an ATM transaction fee and allow the user to choose a specific charitable organization to donate it to.

Disclaimer: 1st Mariner Bank does not endorse Choose Change ATM, nor do we use it's service.

According to the article, "Choose Change ATM empowers users to contribute a portion of their fees to support their favourite charitable causes.

Launched in February, Choose Change ATM has developed a brand of ATMs that lets users donate $1 of each $2 transaction fee to a non-profit organization of their choice. Users select from a display of eight non-profits, supporting causes such as disaster aid, poverty relief and human rights.

Choose Change provides a convenient way for people to support causes they are passionate about. It's a shining example of the kind of corporate generosity increasingly sought after by customers seeking brands that are more in tune with a spirit of giving."

While we do not endorse this company, we do wish them well and think this is an interesting model that is worth discussing.  So, my question is: Would you look for and use a specific ATM knowing that part of the transaction fee could go to a charity of your choice? You can respond in the comments section below.

What motivates you?

by Admin 28. May 2010

Here is a great video I found today on Lifehacker that explains -  through empirical evidence - what motivates people.  Not only is the information fascinating and contrary to what you would assume, but it's illustrated in a white board fashion. 

Be sure to comment about what motivates you.  Maybe we can help one another put our motivations into a new perspective.  

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