Man suing 2200 speaks up and yen based loans

If you do not read the comments here are two recent cautionary comments worth noting.

The first from Jerry, the man suing Vulcan over 2200, speaks up:

Some of the issues evident from an early walk through of my unit included the fire sprinklers being installed above the framing for the ceiling (which would have required an expensive reconstruction of the sprinkler system in the unit), a vent pipe that protruded from a wall below the ceiling, crossing a hallway and then re-entering the ceiling area, a poured concrete deck which appeared to slope into the unit (evidenced by a note from the contractor taped to the sliding door warning everyone to leave the slider closed so as to prevent leaks into the apartment below). Additionally, the anodized metal frame structures on the exterior which included the deck railing, windows and door frames, all were so badly damaged as to need replacement. This would have involved damaging and then repairing the concrete exterior around my unit in order to accomplish a permanent repair of these structural elements (read, I don’t want to live in a leaking unit).

Also in the comments, EconE, explains why you should be weary of the financing offered by Why Pay Double, a site promising 2% loans for condo investors:

We’re currently pushing 120 on the yen even as the USDX has been falling. If the yen “hypothetically” slips to 60 over a long period (30 years is a long time) then the principal also rises…Imagine the person who takes the I/O Yen loan and then finds that not only does the interest rate hikes (The BOJ can’t really lower it much from .5) and a potentially strengthening Yen affect the quarterly payments…but in the end…the 500k balloon payment will actually be 1M while the payments have increased the whole time.

About Matt

Matt , Urbnlivn's publisher, has a love for lofts, floating homes and mid-century moderns.

For years Matt resisted becoming a real estate agent preferring to be an executive in the startup world but he recently caved in the spring of 2014 and became an agent.

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  • EconE

    Here is the data for the historical exchange rates between 1990 and 1999. Take notice that the Yen…over longer periods of time does actually fluctuate quite widely.

    I for one wouldn’t gamble on a low value Yen for the next 30 years.

    http://www.federalreserve.gov/releases/H10/hist/dat96_ja.htm

    I guess the term “exotic loans” has been taken to the next level.

  • EconE

    Here is the data for the historical exchange rates between 1990 and 1999. Take notice that the Yen…over longer periods of time does actually fluctuate quite widely.

    I for one wouldn’t gamble on a low value Yen for the next 30 years.

    http://www.federalreserve.gov/releases/H10/hist/dat96_ja.htm

    I guess the term “exotic loans” has been taken to the next level.

  • EconE

    BTW…thanks for the post Matt. I felt that this was too important of a topic to be buried in the discussion forums .

    Best Regards

  • EconE

    BTW…thanks for the post Matt. I felt that this was too important of a topic to be buried in the discussion forums .

    Best Regards

  • EconE
  • EconE
  • Matthew

    EconE,

    Break this down for me, what does rising Yen mean for loans in the U.S. and the carry trade in general? Are you saying that the carry trade is on the verge of collapse? What do you seeing happening in the next year or two?

  • Matthew

    EconE,

    Break this down for me, what does rising Yen mean for loans in the U.S. and the carry trade in general? Are you saying that the carry trade is on the verge of collapse? What do you seeing happening in the next year or two?

  • EconE

    I’ll try to make it simple…if yen is Y100 to $1US then if you borrow 100 yen to convert to a $ and when you have to pay it back if the yen is stronger, it will cost you more $’s to buy the yen to pay back the loan.

    Is the carry trade on the verge of collapse? Dunno…but it seems as if it has finally made it to the MSM. Some economists and financial writers have raised an eyebrow at it but as to it’s unwinding…if…when…your guess is as good as mine as it is really all speculation.

    What I see happening over the next couple years is that the yen will stay weak (remember…this is just my own idea and best educated guess and should not be mistaken for any sort of investment advice) as Japan probably has a healthy amount of money loaned out at super low rates and they want to collect back as much of the debt as possible before it becomes a burden for other countries…It’s not in any countries best interest to see a fast collapse of the $ as many countries hold $ denominated assets.

    The 30 year estimation is something I wouldn’t even want to venture a guess…that’s just too long out for me to fathom what currency exchange rates will be like then.

  • EconE

    I’ll try to make it simple…if yen is Y100 to $1US then if you borrow 100 yen to convert to a $ and when you have to pay it back if the yen is stronger, it will cost you more $’s to buy the yen to pay back the loan.

    Is the carry trade on the verge of collapse? Dunno…but it seems as if it has finally made it to the MSM. Some economists and financial writers have raised an eyebrow at it but as to it’s unwinding…if…when…your guess is as good as mine as it is really all speculation.

    What I see happening over the next couple years is that the yen will stay weak (remember…this is just my own idea and best educated guess and should not be mistaken for any sort of investment advice) as Japan probably has a healthy amount of money loaned out at super low rates and they want to collect back as much of the debt as possible before it becomes a burden for other countries…It’s not in any countries best interest to see a fast collapse of the $ as many countries hold $ denominated assets.

    The 30 year estimation is something I wouldn’t even want to venture a guess…that’s just too long out for me to fathom what currency exchange rates will be like then.

  • EconE

    What’s even more confusing than the Yen carry trade is how the heck Zillow is so far off on their property values in my neighborhood here in L.A. ROFL.

  • EconE

    What’s even more confusing than the Yen carry trade is how the heck Zillow is so far off on their property values in my neighborhood here in L.A. ROFL.