oops, guess that poll question range was too wide, not specific enough

[netmouse]

For those who answered (some form of) Yes, a certain loan interest rate seems excessively high, the majority responded that "too high " starts between 5 and 25 %, and I'd like to see a breakdown on that. Please answer this question too!

[Poll #1343223]

Comments

[sorcycat.livejournal.com]

Good points, but I think there is something to be said that mortgages in general are complicated and ARMs are even more complicated. I think even college educated folks have a hard time understanding the risk. The more complicated something is, the longer it takes for the customer to understand. I don't know what the solution is, because I don't really want to prevent people who are willing to go through the hassle of selecting the loan they want, but things that are more complicated are more subject to misrepresentation.

[grndexter.livejournal.com]

If you don't understand something, you should hire someone who does to either explain it to you or to represent you. Never go into a transaction without knowing how it works.

[sethb.livejournal.com]

Believe me, I know how complicated mortgages are. I've written code to price them.

The risks of ARMs are easily explained: "The rate you pay will be adjusted annually to 2.75% over the Treasury Rate. In the past 40 years, Treasury Rates have ranged from 1% to 15%. Are you feeling lucky?"

[grndexter.livejournal.com]

different ARMs, different rules.

[sethb.livejournal.com]

Sure; I glossed over the facts that the rate might adjust annually, monthly, or every N years (from 2 to 7 that I've seen), possibly with a longer initial period. And the spread varies. And the underlying rate isn't always Treasuries, it might be Libor. But it doesn't really matter; the risk is the same: that the rate (hence payment) will increase.