The Emerald Hills Blog

Dear Loyal Readers of the Emerald Hills Blog,

Just wanted to let you know that I haven’t abandoned you.  I am having some serious technical difficulties with the website that have been preventing me from accessing the back-end of the site to write new posts.  I literally hacked my way back into the site to post this update.  I hope to have things up and running in a few days, and will get back on track with providing you updates on Emerald Hills real estate.

Thanks for your patience.  Technology is a wonderful thing sometimes….

Chuck

It’s possible…The basis for many Adustable Rate Mortgages is the London Interbank Offered Rate, or LIBOR.   How many?  According to reports, LIBOR is used to calculate rates on $360 trillion (with a t) worth of financial products worldwide.  Basically, the rate that a bank will charge on a LIBOR-based ARM is calculated by the simple equation:

Margin + LIBOR = Rate.

Since the bank’s margin is usually a fixed amount when you close your loan, your ARM will fluctuate as the LIBOR changes.   Well, one of the effects of Congress’ failure to pass the $700B bailout plan was that the overnight LIBOR rate spiked by a record level yesterday.   Here’s an article from Bloomberg News with more details:

Libor Rises Most on Record After U.S. Congress Rejects Bailout

What impact will this have on adjustable rate mortgages?  It’s tough to say, because you have to factor in when a particular ARM is due to adjust, and what rate caps may be in place.  But if you have a LIBOR-based ARM that’s due to adjust soon, you might be in for an unwelcome increase.   Check with your lender to see if you’re potentially in this situation, or simply take a look at your Note for those details.

The good news from Wall Street just keeps on coming…