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Originally Posted by 4RE KLR
OK,
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The "exotic" mortgages were based on LIBOR, which is "London Inter Band Overnight Rate" (or something like that) Non the less it is the rate that banks borrow money from each other, overnight in LONDON, England.
Now today the LIBOR rate is still very low, at 1.25% today. The mortgage companies have taken this as a starting benchmark and raised the rates every six months since these notes were originated. Now, why do they do that when the LIBOR rate is low, and the overwhelming majority of homeowners on the LIBOR ARM are not making the payments as scheduled????? Why, GREED>
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I bet that a LIBOR based mortgage does not just take the LIBOR rate into consideration, but is also adjusted by the US dollar/British Pound exchange rate. So a weakening dollar get you a higher rate too. So you have more than one rate to worry about and get you into even more trouble.
And I think the B in LIBOR is Bank not Band.