Interest Rates and Deinquencies, Oh My

Here's a link i saw on investopedia on the subject- https://www.investopedia.com/terms/c/callloan.asp#:~:text=A%20call%20loan%20is%20a%20type%20of%20loan%20where%20the,future%20ability%20to%20make%20payment.

I must say, there are no ends to what banks will do to make money, isn't it? I remember when I was house hunting, everyone warned me about the variable rate loans (aka adjustable rate mortgages back in the not so distance past). I think people may want to pay even attention to the fine print in these loan agreements

And like you said, yet s other thing boards will need to be mindful of while wrestling with delinquencies. Why do I think this nation is heading towards a middle ages society where there are lords, kings and whatnot and everyone else is a serf?

Back during the last "Home bubble bust" it was common practice of lenders to offer these variable loans to NEW homeowners who struggled to purchase homes. They would convince them they could afford the home because the rates were "stable" for a few years etc... So they introduced a bunch of young couples who could not afford a home to defaulting on them just a few years later. It made my skin crawl when saw those being offered. I knew a small family or new married couple would end up living for the house not living in the house.

This kind of happened to me. I had my HOA home but wanted to purchase a "fixer-upper". In order to get the 2nd house I agreed to a 80/20 loan. Not sure what I was thinking at the time. It turns out the 20% part of the loan turned out to be a "variable" rate loan. Luckily it was the 20% portion. After a few months that rate and payment nearly doubled! It was starting to equal my 80% loan payment! I quickly took action and converted the whole loan into a conventional ASAP.

I always thought WOW a 20% portion nearly broke me. Imagine those who did a 100% variable rate loans! I am not hearing many horror stories as heard back then. It may be because many more people are choosing renting over purchase. That way would avoid the short term purchases.

"Reverse loan" interest rates are variable, I think. So we might see older owners defaulting.

During the Great Recession, our 200-Unit condo towers saw an increase in renters as some owners moved out when unable to pay mortgage & dues. Our % of renters increased quite a lot. Since some owners were so desperate to have their payments covered by renters, they were putting "just anyone" into their Units. Some of the latter were real low-lifes. We experienced an increase in noise nuisances and visitor parking violations. One set was filming porn movies in their Unit. A single man--at night--was often, um, acting out--naked--on his balcony.

But, we only has one (elderly) couple become delinquent on their assessment payments. They did attend a hearing and we put together a payment plan that they could afford.

We have a condo where the renters had been running a "massage" business. This is in condo complex of mostly older people. They might have done massage, but that's not all they did. I think it happens everywhere -

On financing, I think back to the first new-build home we bought back in the early 90's. We owned a home to sell but didn't have much cash for a down payment on the new one although we made decent salaries. So we financed it with a variable rate first mortgage AND a five-year balloon note for the down payment that we paid interest only on during those five years. Thank goodness we ended up with a corporate move after only a couple of years and were able to sell the house for a small profit. I hate to think what we would have done when the balloon note came due. I've never been that reckless again. But we lived in a community in San Diego prior to the 2007/2008 real estate crash where our house tripled in value in five years. We were lucky and had gotten in early and then had another corporate move just as the marked started to tank. Others bought at the peak with 100% mortgages and then lost it all when the market crashed.

I doubt that any primary mortgages are callable unless for a reason, such as incorrect usage like using it for commercial activity instead of residential, as long as the borrower is making payments.

*chuckle* That's a great line.

I don't believe we're in any danger of being wiped out by AI{1}. Anytime soon, at least. I know I'm cynical, but the media is just junk nowadays. Someone wants to get their name in the news, so they make some kind of statement about "AI being dangerous to humanity". Mencken said it best: “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary.” These days, "politics" and "news" seem to be interchangeable - what Al Franken once called "Infotainment".

As for "we can't copyright the algorithms" - I don't know what was actually said, but I suspect the people discussing this were confusing a number of different issues. Computer code can be copyrighted in most places; algorithms tend to be patented (or trade secrets), not copyrighted; there's a current debate about whether the generated content from an AI system can be copyrighted (and the US and the UK seem to be headed down different paths as they consider the question). I don't know the patent status of any of the current generation of AI generative algorithms, but - they're well-enough understood that people have written systems like Midjourney and Stable Diffusion etc that will actually *do* this stuff. I suspect some of the thinking that "we don't understand how it works" comes from an earlier generation of AI (and specifically Cognitive Psychology), where there used to be lots of thought about how the human brain could never understand itself. Which is ... *sigh* I'm too tired to go into it. Again, I blame the media: they have no real interest in explaining the reality of things - they just want a good story. Someone will issue a statement that calls out Asimov's Laws of Robotics or The Trolley Problem, and it'll actively circulate for a few days and then (unfortunately) not disappear and instead show up in search engine results for years and years. And the truth is that that stuff is just logic puzzles and speculation that's marginally interesting but has very very little to do with the realities of self-driving cars and whatnot. If you read Asimov's "Robot" stories, most of them are 'mystery / puzzle' stories - given the Three Laws, how can [main character] explain the apparent murder of [so and so] by a robot? I'm sure Asimov was pleased that many people credit him with their interest in technology - but up until 1971's The Sensuous Dirty Old Man, Dr. A's fiction was all about getting paid by the word.

And while I assume people know this, it's seldom said up-front: people can (and do) hand-wave about "quantum microtubules" but we know ***el zilcho*** about the nature of sentience.

My apologies for jumping in and 'mansplaining'. I love it when Cathy mentions something like AI or the Carrington Event, and I can't resist taking the bait.

Oh - re Harry Potter - it's interesting to consider HP as "sufficiently advanced technology". Almost everything in the books can be explained as some kind of cyberpunk / virtual reality tech (except for that "Time Turner" gadget, which I consider a mistake on Rowling's part - you don't just casually toss time-travel into a universe without it falling apart).

But that's interesting about mortgages. When I was a first-time house-buyer back in the late 1980s, Adjustable Rate Mortgages where *everywhere*, and I couldn't turn around without someone trying to sell one to me. This was after I left grad school (where I had early Internet access) but before the Internet became widely available, so the "Google it" kind of research we take for granted nowadays just wasn't an option. When I look back, I'm amazed and thankful that I was hard-headed enough to avoid getting sold on all of that ARM jive. Because everywhere you turned, people were all "It's adjustable! You start at 2.9% and it could go *down*!" And I'm like "and pigs could fly!" and I had salespeople literally laugh at me for being such a rube.

Bill

{1} A bold statement without any kind of proof to back it, I know. The ability to reproduce is generally accepted as a basic characteristic of a living organism, and we're nowhere near being able to build self-replicating / self-repairing machines. I don't believe there is a robot anywhere that could (for example) replace the garbage disposal under my kitchen sink, for example. As long as we take a modicum of care and avoid doing stupid stuff like hooking AI junk into nuclear weapons systems (ala Colossus: The Forbin Project (humanity enslaved for its own good), The Terminator movies (humanity enslaved to maintain the AI), Dr. Strangelove (mindless automation that kills everyone), or Ellison's "I Have No Mouth But I Must Scream" (the AI is batshit insane)), the biggest danger to the continued existence of the human race is the human race itself.