it is a simple concept- certain products fit certain clients. Period.

The reason we are in the mess now is also very simple- unchecked greed…by banks, investors, wall street and yes even the average homeowner in some cases. Not everyone who sold an option arm is a crook and not every investor or buyer was a liar. Unchecked greed consumed the industry and a lot of bad apples jumped in and created the downward spiral we have been in for the past year. The government also had a mandate to the lending industry to put more families into homes (CRA, FHA, Home initiative grants, etc). It was a policy for almost a decade to put people in homes. At almost any cost.

Not every broker was making 3-4 points off the back end with a 3 year prepay. in fact it was very common to make 1-1.25% ysp with no prepay. What you have said in prior posts indicates you had access to the lower quality POA that were offered.

option arms (esp the fix pay variation) are a good choice for the high net worth client looking to leverage….yes i did just say leverage, their money in certain wealth building techniques. It is not for the average person although if structured correctly with discipline it is also a great tool to build their wealth. Granted the average person does not have the discipline so it is clear they are not a candidate for this product.

So the fact you may suggest the option arm product to 1 out of 200 indicates to me your client base is not of the high net worth calibre, which is fine , however to bash the POA as a horrible product is a clueless comment. As a financial planner I am sure you can see the potential benefit of deferring interest to pick up at a later time to offset some capital gains, income or other potential tax liability.

If you look at some of the wealthiest and most savvy business people you will often see the POA as a tool used to properly leverage risk.

Chris- you mentioned you were with WAMU when they “rolled” out the option arm. The option arm was the offspring of the step rate loan from the 70’s.

It is unbelievable that we are seeing lenders and institutions that have been around for 85-100 years being wiped out or exiting the lending business esp when that was their foundation.

we have a crisis of confidence that was created by unchecked greed….. we are going back to the days of quasi government lending- fannie/freddie/FHA (FHA was the first subprime lender). We will be in this cycle until unchecked greed again rears it’ s shameful head and we will see lending again become lax…. As has been said by many economists- financial systems go through cycles of euphoria and fear. We are in the fear cycle and it is unfortunate but more regulation will hold back many hard working families. We need to enforce the laws we have and punish those who were predatory. What is happening now is that the credit market has swung too far towards tightening and until the new FHA standards come out, many quality borrowers will be out of luck for awhile.

glares,fuzz crawl …

Options Are Good, you are a lost soul !!!!!Hey Chris did you know Mr. J Regan at WAMU …NJ wholesale ???