I'm looking for a lending company to refinance my mortgage through that does not cause cognitive dissonance for me by enabling others to make poor decisions by my indirect support.

Its a similar situation to not supporting a company that supports something you have moral issues with.

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    I don't see that making a blanket statement that ARMs are stupid is productive. For some people, ARMs are a useful tool. I'm in a fixed rate now, but have had a 7 year ARM at a time when I knew I was moving within two years. – bstpierre Mar 14 '11 at 16:15
  • I had an ARM when I wanted to speculate on falling interest rates. It paid off. I have since moved to fixed. Risky, maybe, but not exactly stupid. – James Roth Mar 14 '11 at 18:24
  • are you actually supporting a company if you mercilessly exploit their teaser rates such that they lose money on you? – Peter Green Dec 17 '15 at 14:09

This may be a little cynical but people aren't looking out for you, the home buyer and/or mortgage holder, in a real estate transaction. They're looking out for themselves, as you should be. Meaning: verify the options that the lender gives you, run numbers yourself, get documents to read as much in advance as possible, etc.

Having said that, though, I found that my local credit union took the high road a little more than at other places I've heard about. They were much more conservative in their underwriting requirements than at other places.

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Look for a bank or credit union that is a "portfolio lender". That means that they write loans backed by deposits. Portfolio lenders usually have better terms and tighter underwriting standards. There aren't many of these left.

If you define "stupid" or "immoral" to include an adjustable rate mortgage, you will not be successful. Some religious or other special interest groups have specific banking requirements... there is a Lutheran financial services company, banks that observe Islamic financial principles, Unionized banks, credit unions for specific churches, etc.

ARMs make alot of sense for many people in various situations. For example, if you were in the military with a 5 year assignment somewhere, why would you pay a premium for a 30 year loan that you will never need?

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  • You're right. I wasn't thinking outside my situation when classifying ARMs. – antony.trupe Mar 15 '11 at 5:00

If you believe mortgage companies encourage people to make poor decisions then your best bet is to avoid mortgage companies altogether - i.e. pay off your mortgage.

I had an ARM at one point and it saved me a lot of money since I knew I was only going to be living at the house for 5 years.

Regarding moral issues - do you research every company you purchase products from to determine if they engage in any acts you find morally reprehensible? No one forced people to take out loans they could not afford. Most banks would not have made the loans if there wasn't an implied guarantee from the government and the FED if the loans went south. This proved to be true since the FED and the government indeed bailed out the banks once the defaults started piling up.

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  • I do my best to research every company I do business with, though I don't claim to have mastered this. – antony.trupe Mar 15 '11 at 5:02

There's quite a distinction to be made between a teaser rate, interest only option ARM, and a regular ARM that starts off amortizing over the term of the loan.

The meltdown in '08 included the fact that there were mortgages written with rates that could not possibly stay that low, the terms of the loan showed an annual rate adjustment, and after the second or third adjustment to market rates, were beyond the buyer's ability to pay. Before I got married, but had a wedding date, my wife-to-be was going to refinance. We took a variable and did the math, looking at the next 5 years of payments at the maximum rates. It still beat the fixed. And we sold 2 years after the wedding. If we stayed there, we still had twice the income needed to pay the mortgage and in year 6 would have started to cross over to losing on the deal.

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