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Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak

 
Omega
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06/12/2009 10:22 AM
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Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Game still on this issue will be with us through 2011. That coupled with the situation in California means we have a very long way to go to get outta this mess.


This fall should be.....interesting.






Option ARMs: Paying $98 a month on a $350 Thousand Mortgage

by CalculatedRisk on 6/11/2009

From Bloomberg: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak

Shirley Breitmaier took out a $315,000 option ARM to refinance a previous loan on her house.

Her payments started at 3/8 of 1 percent, or less than $100 a month ... The 73-year-old widow may see it jump to $3,500 a month in two years ... She’ll be required to start paying principal and interest to amortize the debt when the loan reaches 145 percent of the original amount borrowed.

[CR Note: the 145% recast level is much higher than normal. This is now a GMAC loan]
...
About 1 million option ARMs are estimated to reset higher in the next four years, according to real estate data firm First American CoreLogic of Santa Ana, California. About three quarters of those loans will adjust next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, the data show.

[CR Note: recast, not reset. This article uses the two terms interchangeably]
...
“The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,” [Susan Wachter, a professor of real estate finance at the University of Pennsylvania’s Wharton School in Philadelphia] said in an interview. “The option ARMs will be part of the reason that the path to recovery will be long and slow.”

And compare these two comments:

“This loan is a perfect example front to back, bottom to top, of everything that has gone wrong over the last five to seven years,” [Cameron Pannabecker, the owner of Cal-Pro Mortgage] said. “The consumer had a product pushed on them that they had no hope of understanding.”
...
“The problem is, real estate values went down,” [Peter Paul of Paul Financial, the loan orginator] said.

I agree with Pannabecker.

And here is a repeat of the most recent reset / recast chart from Credit Suisse.

Loan Recast Schedule


:armresets2:

Credit Suisse is using recast dates for Option ARMs and reset dates for all other loans.

As Tanta noted: "Reset" refers to a rate change. "Recast" refers to a payment change.

Resets are not a huge problem as long as interest rates stay low, but recasts could be significant. There are some questions about how the Wells Fargo pick-a-pay portfolio fits into this chart, since Wells Fargo doesn't expect significant recasts until 2012 (see A Bank Is Survived by Its Loans









[link to www.bloomberg.com]

Last Edited by Account Deleted by User on 10/21/2011 06:17 PM
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Gradient

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06/12/2009 10:25 AM

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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
“The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,"


That's a self perpetuating hole of DOOM.

Last Edited by Gradient on 06/12/2009 10:25 AM
:coexistt:


glptrainer(at)yahoo.com
Omega (OP)

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06/12/2009 10:26 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
“The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,"


That's a self perpetuating hole of DOOM.
 Quoting: Gradient


Yup MOST have negative equity and took out HELOCS and are up to their ears in debt.

They are fucked.
damned
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Anonymous Coward
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06/12/2009 10:27 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
YAWN
Omega (OP)

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06/12/2009 10:28 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
YAWN
 Quoting: Anonymous Coward 701030

:blnfthshp:
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Anonymous Coward
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06/12/2009 10:33 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
keep planting them cabbages hos
Phasesphere

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06/12/2009 10:36 AM

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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak


Last Edited by Ghost-Houndz on 06/12/2009 10:41 AM
What happened to my beloved GLP????.
Anonymous Coward
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06/12/2009 10:44 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Omega:

Wait until you hear the loud cry from the banks when they "re-set" their balance sheets to the neg. amortization booked on (new) defaulted loans. Now that will be very interesting.
Omega (OP)

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06/12/2009 10:47 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Omega:

Wait until you hear the loud cry from the banks when they "re-set" their balance sheets to the neg. amortization booked on (new) defaulted loans. Now that will be very interesting.
 Quoting: Anonymous Coward 423573


From what I am reading they are trying their damnest to delay foreclosures, etc to keep this toxicity off their books.


Lets see how long they can hold out lol.....

This be them.....


:maxfcked:
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Anonymous Coward
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06/12/2009 10:47 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
YAWN
 Quoting: Anonymous Coward 701030



Go back to watching "dancing with stars"......it is all you understand anyway.
Anonymous Coward
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06/12/2009 10:50 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak

From what I am reading they are trying their damnest to delay foreclosures, etc to keep this toxicity off their books.


Lets see how long they can hold out lol.....

This be them.....


:maxfcked:
 Quoting: Omega


Have a friend left BAC and there are bodies buried everywhere.....and the comment was "everywhere". Interesting rate adjustments and payments due in the next 12 months......hummmmm
Omega (OP)

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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
“This loan is a perfect example front to back, bottom to top, of everything that has gone wrong over the last five to seven years,” [Cameron Pannabecker, the owner of Cal-Pro Mortgage] said. “The consumer had a product pushed on them that they had no hope of understanding.”
...
The problem is, real estate values went down,” [Peter Paul of Paul Financial, the loan orginator] said.


fortunately this is by far the easiest kind of problem to fix were it not for one small glitch, RE values dropped after the loans were written.

Otherwise simple refinancing would have erased this pending problem. But with RE prices in the shitter that is impossible. And the waves of default only compound the problems.
 Quoting: loosecannon 570656


And real estate prices could fall another 30% before it's all over......= death spiral.

Last Edited by Omega on 06/12/2009 10:53 AM
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Art Deco

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06/12/2009 10:52 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
There's no way this is going to end well.

Nice Find, Thanks Bro!
In ten years we'll look back on this moment, laugh nervously, and quickly change the subject.
Omega (OP)

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06/12/2009 10:56 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
There's no way this is going to end well.

Nice Find, Thanks Bro!
 Quoting: Art Deco


Thanks man. All indications are California is toast.

I sense an Epic Bail followed by an Epic Fail.


Fail Bail. Someone make an emote of that lol.....




:5:
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Milky Way Today
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06/12/2009 11:01 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Fact of the matter is that Option arms are horrible for banks, but like Gold for the informed consumer. Current interest rate (Fully indexed rate) is 2.75% to 3.50%.

If an informed consumer does not pay at least the interest only part of the loan, what the heck is he thinking. Recast are the problem, but the only occur if the consumer continues to pay 1% vs the I/O minimum of Fully indexed rate.

THe value of these loans collapsed in the market place, not because borrowers were not paying, they collapsed because the effective rates given to borrowers are way below current mortgage rates.

What investor is going to buy a mortgage that yields 3% when the current market is at 5.5%. Plus you have the risk of a borrower losing his job and collateral droping below Mtg amount.

Stay tuned.
Anonymous Coward
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06/12/2009 11:03 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Omega there was a couple really good articles on market oracle a week or two ago about the ALT-A mortgages resetting with great charts and all. You might want to check it out. I'm at work or I would look it up. It makes the subprime mess look like a picnic in comparison. Good post once again.
Anonymous Coward
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06/12/2009 11:05 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
This is what happens when you become a dumb ass and elect presidents that belong to secret societies. Did deregulation make American capitalism work more efficient. It was another con job, so they could empty your retirement savings and collapse the sysytem. The same people buy up the mess with pennies on the dollar. You have all been perfect little sheep and still think you live in the land of the free. You have become so complacent you deserve this. Maybe this time you will find the balls to do something about it.
Omega (OP)

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06/12/2009 11:08 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Omega there was a couple really good articles on market oracle a week or two ago about the ALT-A mortgages resetting with great charts and all. You might want to check it out. I'm at work or I would look it up. It makes the subprime mess look like a picnic in comparison. Good post once again.
 Quoting: Anonymous Coward 612570


Hmmmmm thanks perhaps this is the one you were referring too-a ton of charts at the link including resets........



[link to www.marketoracle.co.uk]
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
loosecannon
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06/12/2009 11:08 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
And real estate prices could fall another 30% before it's all over......= death spiral.
 Quoting: Omega


it's a self reinforcing spiral, the defaults drive down RE prices compounding the problem.

Early on lots of folks within Congress and the econ sector wanted to refi mortgages because they sensed that was the only way to save the banks. Address the source of the problem. Not the the sypmtoms.

Geithner had other plans. Geithner was wrong. For such a smart guy he sure missed the obvious.
Anonymous Coward
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06/12/2009 11:10 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Here is what I was talking about. Omega if you have the time bro you might want to check out this link and post some of it to your thread. It's some really good stuff and makes you really think about the tsunami of stuff headed our way. Awesome charts and story please read.

[link to www.marketoracle.co.uk]
Anonymous Coward
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06/12/2009 11:25 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
California to come to a "grinding halt" by July 1st 2009.

[link to www.latimes.com]

Wooooo, this is going to be FUN.
Omega (OP)

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06/12/2009 11:27 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Here is what I was talking about. Omega if you have the time bro you might want to check out this link and post some of it to your thread. It's some really good stuff and makes you really think about the tsunami of stuff headed our way. Awesome charts and story please read.

[link to www.marketoracle.co.uk]
 Quoting: Anonymous Coward 612570


Yup great charts at that link!

:5:
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Omega (OP)

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06/12/2009 11:40 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
The term in the industry is called a trash out.

LMFAO.




So if your house is getting foreclosed are the appliances yours to take while you still have posession?

SURPRISE, Ariz. -- Police and prosecutors have warned those in foreclosure not to pick apart their homes just because they are losing them.

Surprise police said homeowners aren't getting the message, and now the city's first former homeowner is going to jail for stealing fixtures and appliances.

Police arrested Roberto Garcia, 34 and booked him on two felony counts. Police showed photos of Garcia's former home.

They said he removed almost everything that could be pulled out. The cook-top stove, the dishwasher, the refrigerator -- it was all removed.

In addition, police said Garcia cut a huge hole in the ceiling so he could remove the air handler They said he allegedly took the air handler to his mother's house.

"I'm sure he was upset," said Surprise Police Chief Dan Hughes. "But that doesn't give him a right to tear up a home. It devalues the community around it."

Investigators said Garcia also took outside lights and even a palm tree out of the backyard.

He's the first to be arrested in Surprise for stripping a home, but authorities promise he's not the last.

"We won't put up with the stripping of homes in Surprise," said Randy Oliver, Surprise city manager.

If convicted, Garcia could spend two years in jail.

Police said a good a rule of thumb if your leaving your home behind, it needs to be left in the same condition you purchased it.


[link to www.kpho.com]
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
RUSH
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06/12/2009 11:46 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
wholly F'n sh..! been around here a while but this stinks to high heaven.. and im not even religious.. F me!

good catch Omega


Rush
RUSH
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06/12/2009 11:49 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
be suprised what several beers can make you say this early in the morn.. west coast here


Rush
Avian

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06/12/2009 11:51 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
There's no way this is going to end well.

Nice Find, Thanks Bro!


Thanks man. All indications are California is toast.

I sense an Epic Bail followed by an Epic Fail.


Fail Bail. Someone make an emote of that lol.....




:5:
 Quoting: Omega



reminds me of an old ad I once saw

For Sale: 1 Single Person Parachute, Used Once, Never Opened, Small Stain in Back. Serious Idiots Only.
"When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it."
- Frédéric Bastiat

food, water, ammo, weapons, battery back up solar, hand well pump, wood stove and 1 year of food...oh yeah PM's too...good luck
Omega (OP)

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06/12/2009 11:59 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
There's no way this is going to end well.

Nice Find, Thanks Bro!


Thanks man. All indications are California is toast.

I sense an Epic Bail followed by an Epic Fail.


Fail Bail. Someone make an emote of that lol.....




:5:



reminds me of an old ad I once saw

For Sale: 1 Single Person Parachute, Used Once, Never Opened, Small Stain in Back. Serious Idiots Only.
 Quoting: Avian


LMAO. Still want someone to make a fail bail emote. Isn't there a site where you can make your own? I need to check into that. ;>)
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.
Anonymous Coward
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06/12/2009 11:59 AM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
This is what happens when you become a dumb ass and elect presidents that belong to secret societies. Did deregulation make American capitalism work more efficient. It was another con job, so they could empty your retirement savings and collapse the sysytem. The same people buy up the mess with pennies on the dollar. You have all been perfect little sheep and still think you live in the land of the free. You have become so complacent you deserve this. Maybe this time you will find the balls to do something about it.
 Quoting: Anonymous Coward 628002

elect Who is the sheep here? sheeplebah
Anonymous Coward
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06/12/2009 12:28 PM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Game still on this issue will be with us through 2011. That coupled with the situation in California means we have a very long way to go to get outta this mess.


[link to www.calculatedriskblog.com]


[link to www.bloomberg.com]
 Quoting: Omega


'long ways to get out of this mess'

LOL.

a govt that has already spent 12 TRILLION and will spend TRILLIONS more is digging a hole for the people of the U.S. that will not be resolved by anything except of the collapse of the USD and the U.S. economy.

it is just a matter of time.

it is not a theory, it is a fact.

anybody's guess after that...world currency, world tyranny, world war..prolly all of the above.
Anonymous Coward
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06/12/2009 12:30 PM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Nice pot Omega.

That chart really shows just how seriously bad this whole situation is going to get.
These loans, defaults in most cases are going to create dead bodies for a filled cemetery.

With rising interest rates, which HAS to happen, these debts will be laughable and the only one left to pick up the tab for the banks and mortgage companies will be St. Obama.

Can the govt. really afford to do this all over again in the next 6-12 months? They have no choice now.

That is going to mean possible "probable" govt , ownership of some or a few very large banking entities(BAC?) to which these defaults will be poured into. Eventually, the servant population will pay for this all.

I'm curious that the pressure is being put the Fed, at least in some small way now. But I haven't seen it before. Could it be, the Fed, with over 2 trillion in assets(LOANING money to the USA is very good business) , could be assimilated by US Govt?

That would be a ballsy move by the administration. Almost like Godzilla vs. King Kong.

Watch the battle unfold as the music stops and the few chairs left are filled. Like the Titanics lifeboats, there aren't enough to go around and I expect chivalry will play no role in who gets on one. It's all for one and everybody for themselves now.

Expect a rocky ride for the next few years , prepare-prepare!

When this is all said and done you will NOT recognize America anymore.
Omega (OP)

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06/12/2009 12:31 PM
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Re: Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak
Nice pot Omega.<<<<

yeah its Apollo 11- great indica. It'll blow your mind man....

rofl

rastabanan
Handguns are a skill; shotguns an art; rifles a science.
_____________________________________
Democracy is two wolves and a sheep voting on whats for dinner.

Disarmament is the precursor to Genocide.

Better to take action now rather than chances later. Your choice.

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