An ARM Full

Karen DeCoster’s recent post, On ARMs, Bullish Know-Nothings, et al, critcized my posted thoughts on Karen’s labeling of ARMs as “evil.”

In her post, Karen notes that much of the ARM market could not exist without the propping up which the government affords the financial markets.  A fact which I do not disagree with.

Be that as it may, and regardless of Karen thinking my thoughts on ARMs, as merely risky financial tools, as being “poorly thought out and very misguided,” I think Karen’s own comments, in her post linked above, support my statement that Karen is erroneous in labeling ARMs as evil.

In my post, Pay Option ARM and Hammered, I stated that the issue, in regards to ARMs, is not that they are evil, but that they are marketed unethically.

...I will offer some insights on what I think is the actual issue with the sale of this loan product to individuals.  A lack of ethics within the mortgage industry, more specifically the subprime/non-conforming loan industry,...

Karen supports this statement in her post when she writes,

Historically, ARMs were financial vehicles created by banks only for their most wealthy and financially sound/responsible clientele.

Karen then reiterates this further into her piece when she writes,

...once a luxury financing alternative that private banks offered to wealthy individuals...

This is what I had to say in my post in regards to whom ARMs were being sold to.

The loan was being sold to individuals on fixed incomes, to individuals in real estate markets known to be stagnant or depreciating, and to individuals who could barely qualify for the minimum monthly payment due at the inception of the mortgage.  Individuals at the most risk for payment default were (are) being sold the riskiest home loan product on the market.

I stand by my words, which follow.

ARMs are not evil, they are simply financial tools.  The issue is the ethics of those pushing the this loan product to those individuals who are least capable of operating the tool.

Posted by on 09/17 at 06:36 AM

  1. Well, John, if my experience is any indication, don’t expect any sort of clarification or anything.

    My comment on your last entry to this subject explains, so no need to repeat it.

    I didn’t receive any response to my two emails to Karen, nor has any action been taken on that comment, to, at least, concede that her justifiable tirade against me was at least framed in a way that’s demonstrably 180 out from my actual market posture as bearish rather than bullish. Her bog entry remains unchanged.

    I wasn’t seeking a warm embrace, or anything. I admitted my mistake in characterizing her wrongly and apologized. She appears reluctant, or refuses to admit hers. And I’m not seeking an apology either. I think her post was justified. I deserved it. But her facts are wrong, and that’s just a plain fact.

    Perhaps it’s noteworthy that I received two emails from different people that told me it would be a cold day in hell before she backs down an inch.

    Alright, I’ve said my piece, and this is ultimately a far better forum for it that doing a housekeeping blog entry on it. Done, as far as I’m concerned, whether Karen does an update in her blog or not. Of course, I half expect some other offensive over some other point of order that I’ve neglected to account for.

    Posted by Richard Nikoley  on  09/17  at  10:31 AM

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