Word: greenspans
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Dates: during 2000-2009
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...never easy to understand exactly what Alan Greenspan means when he makes his periodic Delphic statements about the financial system. But the Federal Reserve chairman set a new whazzat? standard recently when he suggested that the millions of homeowners who proudly hold a fixed-rate mortgage--roughly 80% of all those with a mortgage--are committing a financial blun-der that may cost them thousands of dollars a year...
...Greenspan's view, this peace of mind simply comes at too high a price. Look at today's mortgage rates: the average 30-year fixed rate is 5.7% vs. just 3.7% for the average one-year adjustable-rate mortgage, or ARM, which resets every year. On a $200,000 loan, the fixed rate costs $1,160 a month, while the ARM costs just $921 a month for the first year. What happens after that is where it gets interesting. Within two years the ARM could rise as much as 4 percentage points, bringing the monthly payment to $1,407. Most...
...opting for that higher rate, though, homeowners win only if rates rise. If rates remain stable or fall, the ARM is by far the better deal because the rate starts out low and automatically adjusts downward without the cost of refinancing. Beyond that, Greenspan said, fixed-rate borrowers pay an excessive premium. In high finance there is a quantifiable cost to fix a rate for 30 years. Home-owners pay about 1 percentage point on their loan rate for it, while mortgage lenders (which must hedge their rate risk) pay less than half of that. Over the past 10 years...
...Greenspan challenged the mortgage industry to offer new products that bring down the cost of peace of mind. Most buyers couldn't care less how much of their monthly payment represents interest; they just want to know the payment won't change. One way to fix the payment without the cost of fixing the rate is to hold an adjustable-maturity mortgage--in which the payoff period, not the monthly outlay, rises and falls with interest rates. Outside the U.S., fixed-rate deals are far less common, and adjustable-maturity mortgages are readily available. An ARM with a lifetime rate...
...When Greenspan realized that students were willing to disclose a great deal of personal information on thefacebook.com, he decided to add the new FaceNet features onto his universal facebook...