Posted on 09/05/2006 2:01:48 PM PDT by ex-Texan
With millions of adjustable-rate mortgages about to reset this fall, experts expect a wave of foreclosures by Americans in every income bracket. Here's why they could soar in late 2006 and beyond:
Those easy-mortgage chickens are coming home to roost.
This fall the adjustable-rate mortgages (ARMs) that millions of Americans took out during the recent housing boom will be reset, and many homeowners will see their monthly mortgage payments shoot up by as much as 20%. According to the Mortgage Bankers Association, of all mortgages financed in 2005, 36% were ARMs -- the highest ever.
This is a matter of concern because ARMs are typically initially made at a lower rate and then increase after a fixed period of time, usually one, three, five, seven or 10 years, after which the rate will more closely reflect current rates. As interest rates increase, mortgage payments increase. Between $400 billion and $500 billion in ARMs are due to be reset by the end of 2006. The following year will be even more dramatic, when more than $1.5 trillion will be reset.
For many Americans, this is scary news, if hardly unexpected. * * * [M]any of them are finding themselves stuck in a house they may soon no longer be able to afford, and, as the real estate market peters out, there's little they can do about it. * * *
Unprecedented situation:
* * * A major concern is that the number of ARMs issued at subprime rates to borrowers with lower credit ratings is not known. "We know that ARMs default at a higher rate than fixed, and subprimes default at higher rates than primes," says Sharga. "Never have so many ARMs reset at the same time. There is no precedent for it."
(Excerpt) Read more at realestate.msn.com ...
Buying a home in such a ridiculously inflated market in the first place is the worst part...
I have an adjustable rate mortgage, does that mean I should some how be feeling miserable right now? Cause I don't feel miserable at all. I actually feel just fine.
I am not stupid, nor am I a fool. An ARM was a good option that has saved me a lot of money. I will be moving to a new home in the next year sometime, so the new financing will be at a fixed rate before my ARM ever has a chance to adjust.
No worries for me.
i live in Long Beach, but I rent because I have been priced out.
Plus, 50 year old 2 bedrooms with an add-on are not worth $500k+.
So who doesn't?
This is why when I refinanced, I went with a 30-year fixed.
Let's see, all those folk who got the 'interest only' mortgages, where they were 'qualified' for houses they no way qualified for - will be left holding mortgages at the same amount they 'bought' for...but now wont be able to give away. Did I get that right?
"You perform black magic ceremonies naked in your basement with live armadillos and naked loose-limbed dancing every full moon."
I thought that was the Dims, beseeching The Great Bubble for a real estate collapse.
But you forgot to mention these very gullible people were encouraged by a guy named Greenspan. He was touting ARM mortgages in late 2003 and in early 2004. Some people ought to have realized that $ 300,000 Long Beach condo was $ 150,000 over priced. But the realtors and mortgage brokers only talked about budgeting monthly payments. They did not discuss potential adverse consequences. No salesman does when the time comes to sign the papers. They just hold the pen out in front of your face. Smart sales people know when to shut up.
They have "limits".
Nice idea.
However, I personally could become unemployed if this comes to pass the way some hope it does-I do mortgages for a living.
Such is the power of ex-Texan that he has taught the armadillos to rise up on their hind legs and do the hokey-pokey!
Dims? Ex-Texan?
But I repeat myself...
If you want to own a home, there are plenty of places outside CA where you can make at least close to the same salary and spend one quarter the amount on a house.
And you know this how?
What you have to do is be willing to shoot craps with strange people in a dark alley.
He knows everything. Just ask him.
When Will the Tsunami of Foreclosures Hit?
uhhhhhhh..............
I'd guess, just after the November elections.............
ARM's are OK if you don't plan to hold for real long. We have ARM's on some of our investment properties, but they're still locked in for the first 7 years in case we need to ride out a slump before selling. Even if the slump lasts longer than 7 years, the rent increaces over that time will offset the increased mortgage payments.
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