I am not sure I agree with this. Time and time again I hear stories of homeowners trying to refinance their adjustable mortgage before it becomes a problem but the lenders are not helping if the homeowner is current on payments. Why wait until someone falls behind. The lenders know that once the rates adjust lots of people are going to be in trouble, why not reset these loans to a fixed rate and avoid more trouble? Do the banks want more people to default so they can then ask for more bailout money for their yearly bonuses? It is time for the lenders to get ahead of the situation, stop being greedy and trying to milk every penny they can, fix people's interest rates and be done.
Daily Real Estate News | April 22, 2009 | Share
Option adjustable-rate mortgages aren’t imploding as quickly as predicted because interest rates remain at historic lows, but resets are likely to pick up next spring, according to Credit Suisse.
Option ARMs give borrowers the option of making low payments that don't even cover the interest due which is then added to the outstanding loan balance. A total of $500 billion of option ARM loans are outstanding, says the bank.
About 37.5 percent of those originated in 2005 are outstanding; 63 percent originated in 2006 are outstanding, and 82 percent of the 2007 loans remain, according to Barclays Capital.
The Mortgage Bankers Association says the impact of an increasing tide of resets will be diminished because lenders are helping borrowers refinance the option ARMs before they reset.
"I don't think this is going to be the tsunami that was forecasted a few years ago," says Keith Gumbinger, vice-president of HSH.com, a publisher of loan information. "But it's probably bigger than a ripple in a pond."
Source: BusinessWeek.com, Prashant Gopal (04/17/2009)
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