In a recent blog post by CBS Evening News correspondent Cynthia Bowers we find that she has had some problems with the housing market herself. Bowers apparently didn’t grasp the fact that her Adjustable Rate Mortgage (ARM) can actually adjust:
“For a while we were okay. Then that Fed rate started going up, and so did our ARM. Over a five-month period it increased the cost of our monthly mortgage by nearly 40%!” Bowers wrote.
But Bowers shouldn’t have been surprised about her rate adjustment. According to Nexis, Cynthia Bowers has been reporting on the mortgage and housing market since at least 1997. With a decade of industry reporting under her belt, you’d think she’d be able to anticipate the fact that rates shift and payments adjust.
In Bowers’ latest report for the August 16 “CBS Evening News,” she examined two different cases of people being hurt by the recent “mortgage meltdown.” The first family she mentioned bought their house with an ARM, yet they were flummoxed to find out that the rate was, you guessed it, going up!
“He bought his suburban Chicago home fifteen months ago using an adjustable rate mortgage. Since then he’s seen it skyrocket four points and his monthly payment go up by almost $700 a month, and it could go higher,” Bowers said in the broadcast.
Bowers reporting on this issue brings three words to mind: conflict of interest. Maybe someone who just got pinched by an ARM shouldn’t be reporting on people in the same situation? Just a thought – it might shift the bias toward the homeowners?
Yes, it is unfortunate for the family, but it seems as though they’re angry their mortgage did exactly what it could do, adjust. Nowhere does it say that mortgages can only adjust when the rate drops.
The second family Bowers covered in her broadcast had the same thing happen to them as they were about to close. The rate adjusted upward. However, according to Bowers:
“They got lucky. The developer eager to make a sale dropped the price, making it possible for them to get into their dream home.”
Maybe that should have been the story. A developer lowered his price so a family could have its “dream home.” But don’t hold your breath for such pro-business reporting.
As for Bowers, maybe she could ask Katie Couric for a loan.
- Stuart James is a Research Analyst at the Business and Media Institute.
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ADJUSTABLE--it's the sole
August 17, 2007 - 13:14 ET by Mean Gene Dr. LoveADJUSTABLE--it's the sole reason I didn't (and will not ever) take out an adjustable rate mortgage.
I mean, c'mon!
"Whoa, whoa, whoa, whoa, whoa! There's still plenty of meat on that bone. Now you take this home, throw it in a pot, add some broth, a potato, baby you've got a stew goin'!" -- Carl Weathers
Me either, I just purchased
August 17, 2007 - 13:21 ET by general companyMe either, I just purchased another home about a year ago, the rates were as low as I ever remember, did anyone realy think they would get lower?
Same here
August 17, 2007 - 14:04 ET by Jachim72Absolutely, we bought in April of 2006. At that time, the savings on an ARM vs. fixed were almost non-existant. It was not worth the risk of the ARM going up in a couple of years, so we decided on the fixed and have been happy with it.
Good going.
August 18, 2007 - 06:36 ET by sarcasmoAnd even those who weren't as wise as you were have been literally barraged with ARM-to-fixed-rate "Ditech.com" (General Motors loan arm) ads for the past 3-4 years. To me, this means that GMAC has made a big bet against higher inflation with union members' pensions (ie "my taxes & yours"!) as the collateral, but nobody -- especially financial "journalists" (and I use the term loosely!) seems to have noticed (much less investigated...) that inconvenient possibility, and of course I might be wrong...But if so, someone still needs to explain how.
JMR
Rally online with fans of Dr. Ron Paul. And Godspeed, Jamaica. If this storm's as bad as I suspect, I'll try to come back & spend some dollars.
}}---> No joke sarc
August 18, 2007 - 06:45 ET by Cool ArrowPhone calls from Quicken, and Ditek twice a week, every other webpage, second only to Cialis, Levitra, and Viagra on the tube.
Seems they would have known my house was 4 years paid off, but they sure wanted me back in bondage.
I'm happy my son listened to me about ARM loans.
~LYDSEXICS UNTIE!~
The thing is...
August 18, 2007 - 07:02 ET by sarcasmoI'd started believing about 3 years ago (when I figured out what the unions and GM management were probably-doing with the Pension Benefit Guarantee Corporation's taxpayer-financed guarantees) that in the end, that barrage of boring Ditech.com ads was all being financed, in the end, by either my taxes or by future inflation-taxes.
Think about it...I can fully believe the various recreational boner-drugs would be that-popular, but how could this barrage of Ditech ads have possibly been anything other than a long-term bet, and when people bet that big & that-stupid it's almost always because they're betting someone-else's money... Economists call this effect of laws like the PBGC "moral hazard."
As we've seen over the past few days, I tend to resent it when I & very-few other bloggers webwide have to do almost 100% of the financial journalism work for highly-paid financial "journalists." Whether it's the recent actions of the Fed, or central bank manipulation of the precious-metals markets, or the future-fears I have in this case for us taxpayers regarding the PBGC & the financial shenanigans of General "Motors," that resentment's unlikely to change. I'll try to at least keep a sense of humor about it. :)
JMR
Rally online with fans of Dr. Ron Paul.
Texas saw it coming
August 18, 2007 - 07:11 ET by Cool ArrowTexas narrowed the guidelines for Second Mortgages about 7 years ago to money reinvested in the home. I'll bet there's a few people breathing easier here as a result.
Not really good when a government tells you what you can do with your real assets, but at least it was a State level decision.
~LYDSEXICS UNTIE!~
I'm sorry, but if this
August 17, 2007 - 13:22 ET by motherbeltI'm sorry, but if this woman's been reporting on housing and mortgages since 1997 and still is surprised that her payment is going up, she has grapes for brains.
Maybe Bowers Should Ask Katie For a Loan?
August 17, 2007 - 13:30 ET by CaringwhiteguyI've got a better idea. With all the moxie and intellect this babe has shown, she should immediately replace Katie as anchor on the CBS Evening News. Her salary bump should be able to cover the increased payment on her own ARM.
It's simple
August 17, 2007 - 13:34 ET by c5thenIf rates are high, you concider an ARM as it is likely that rates will come down. If rates are near their historic lows, it is unlikely that they will go lower and almost definite that they will go up. Today, ARMs are marketed with artificially low first year rates that are guarenteed to go up even if over all rates stay the same. Most people who go for an ARM are doing it because they really can't afford the house they want with a slightly higher fixed rate. They'd be better off in Vegas. At least there it's possible for them to win.
The day that "politician" became a career choice is the day we started losing the Republic
You brought up a good
August 17, 2007 - 14:48 ET by Mean Gene Dr. LoveYou brought up a good point: "Most people who go for an ARM are doing it because they really can't afford the house they want with a slightly higher fixed rate."
Too many people these days are digging themselves into a hole because they are buying houses they can't afford regardless of fixed or adjustable rates. Just because one is pre-approved for a certain amount, doesn't mean they can afford it. I was approved for $175,000...I knew I couldn't afford that (and still eat and do stuff), so I bought a house at $141,000 that I knew I could afford and I am glad I did.
People need to stop living beyond their means.
"Whoa, whoa, whoa, whoa, whoa! There's still plenty of meat on that bone. Now you take this home, throw it in a pot, add some broth, a potato, baby you've got a stew goin'!" -- Carl Weathers
Living within your means
August 17, 2007 - 15:09 ET by Stuart Jameshttp://businessandme...
Here is another piece where the media didn't question wether someone bought to much house. check it out.
Thanks for the link. My
August 17, 2007 - 15:55 ET by Mean Gene Dr. LoveThanks for the link.
My point exactly.
"Whoa, whoa, whoa, whoa, whoa! There's still plenty of meat on that bone. Now you take this home, throw it in a pot, add some broth, a potato, baby you've got a stew goin'!" -- Carl Weathers
Dream home
August 17, 2007 - 20:47 ET by pbanks7“They got lucky. The developer eager to make a sale dropped the price, making it possible for them to get into their dream home.”
Well, DUH! My dream home was one I could actually afford. Similar houses 2 miles west of me cost 20-30 thousand more because I live near the airport. Landing Cessnas go over the house 3-4 doors down. Since they are landing they make almost no noise. The only planes I really hear are the Warbirds during air shows. I got lucky.
Ignorance is bliss. It's easier to repeat a mindless slogan than to do some actual research.
ARM's are not automatically bad news
August 17, 2007 - 13:59 ET by SmartypantsThe truth is that adjustable rate mortgages, when wisely used, can save home owners thousands of dollars in interest cost. This is because, historically, there has been a significant spread between the interest rates of 30 year fixed and adjustable mortgages. If home buyers know, for instance, that they will only be in a specific house less than five years, there is not much reason to pay the premium cost of a fixed mortgage, especially when there are 5 year ARM's available. The problem stems from the fact that too many people want it all. They want the benefit of the savings of those low interest rates, but they refuse to accept the risk inherent with an adjustable rate. This is no different than those who never go to college but want to get paid as if they are a neurosurgeon.
Poor Cynthia
August 17, 2007 - 14:12 ET by River CityCynthia Bowers has proven that ignorance is not bliss. How do you get that national TV gig and be so stupid? I understand she doesn't have to be a rocket scientist but she does have to understand real estate and mortgages to do her job, doesn't she? No wonder so many in network TV are pulling for the federal government to bail out the stupid people who are over the heads in too much house. I agree, this is a conflict of interest.
“Government does not solve problems; it subsidizes them.” Ronald Reagan
Reality hits hard
August 17, 2007 - 14:20 ET by motherbeltI went back and re-read the post, and I don't think Bowers is expressing surprise that her rate when up, as much as she is complaining about it. Well, Cynthia, reality's a bitch when things turn out just like you were told they might (yet you hoped not.
Our ARM
August 17, 2007 - 14:24 ET by smitty031has a 5 year rate lock...
I thought this was common for 5 year ARM's?
Bowers sounds like...bowels.
August 17, 2007 - 14:42 ET by Senior ChiefBowers sounds like...bowels. I'm sorry folks. For a reporter with bowel's brain, an anchor of Couric's caliber and a moronic management, is a replica of CBS audience and its organization- its called MORONS!
“They got lucky. The
August 17, 2007 - 15:53 ET by mikej“They got lucky. The developer eager to make a sale dropped the price, making it possible for them to get into their dream home.”
Yet I'm sure a few years from now if this family has trouble making pymnts, the developer will be on the hook for letting them get into the house they couldn't afford in the first place.
The stupidity of people amaze me, myself included. I overbought on my last house and it's nobody's fault but my own. Not the lender, real estate agent or anyone else's. And I might be stupid but I sure understood what an ARM was and that the rate had a very good chance of going up, thus increasing my house payment.
}}---> Twist my A.R.M.
August 18, 2007 - 06:24 ET by Cool ArrowAll these Trump wannabe's bragged about how much house they got for the payments.
Instead of saving for a down payment on a modest house they "took advantage" of available alternate funding on a bigger one with payments doing nothing much more than current interest coverage.
Does anybody have stats on the Subprime meltdown by State?
~LYDSEXICS UNTIE!~