More Trouble Ahead for Adjustable-Rate Mortgage Holders
The subprime storm isn’t blowing over.
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Posted by Jed Moss on Aug 02 2007 under Adjustable-Rate Mortgages
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experience with your refinance, home equity loan, or new home purchase.
That is the Mortgage Foundation difference.
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Archive for the 'Adjustable-Rate Mortgages' Category (Chronologically Listed)
Adjustable-Rate Mortgages Continue to Cause Problems
It’s not just a subprime problem. It’s an adjustable-rate mortgage problem.
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Posted by Jed Moss on Jun 18 2007 under Adjustable-Rate Mortgages
Can You Afford an Interest-Only Home Loan?
Interest-only and deferred-interest mortgages are gaining increasing popularity, as owners like the idea of having the freedom to decide how much to pay against their mortgage each month.
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Posted by Jed Moss on Jun 12 2007 under Interest-Only Mortgages, Mortgage Advice
Adjustable-Rate Mortgage Advice: Know the Terms
Don’t fall into foreclosure.
Familiarize yourself with the key terms associated with adjustable-rate mortgages and you stand a much better chance to not being caught off guard when various situations arise.
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Posted by Jed Moss on May 31 2007 under Adjustable-Rate Mortgages, Mortgage Advice
A Fixed-Rate or an Adjustable-Rate Mortgage: Which is Best?
Whether to take a fixed-rate or a adjustable-rate mortgage is one of the most important financial decisions when shopping for a home loan.
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Posted by Richard Barber on May 28 2007 under Adjustable-Rate Mortgages, Mortgage Advice, Mortgage Rates
Adjustable-Rate Mortgages: The Most Dangerous
It’s a familiar refrain in the current housing market: payment shock on adjustable-rate home loans is causing a countless number of owners to default.
In order to avoid this unwanted fate, it’s important to be well-versed in the two most dangerous types of adjustable-rate mortgages.
Posted by Jed Moss on Apr 20 2007 under Adjustable-Rate Mortgages
An Adjustable-Rate Mortgage Modication: Change Terms on Risky Home Loans
Panel members at a Congressional hearing on the subprime crisis recommend changing the terms of ARMs to forestall foreclosures.
A series of speakers at a Congressional hearing of the House Financial Services Committee on Tuesday called for restructuring adjustable rate mortgage loans to help solve the subprime mortgage crisis.
Posted by Jed Moss on Apr 20 2007 under Adjustable-Rate Mortgages
Mortgage Refinancing an Adjustable-Rate Home Loan: Four Reasons Why
Especially in the current housing market - as initially low home mortgage rates are spiraling upwards - individuals are hoping to refinance home loans.
Before you decide, however, it should be clear what your purpose for refinancing is so that you can be sure your mortgage is still meeting your financial needs. Let’s review a few basic reasons why you’d go through with this process:
1. Lowering Your Rate and Payment
Many people refinance their adjustable-rate mortgage to lower their interest rate. It may be that you got your ARM at a higher rate than what is currently available. If you refinanced to a lower interest rate, you would subsequently be lowering your monthly mortgage payment and possibly saving yourself some money.
2. Consolidating Debt
Consolidating high-interest credit card debt is another good reason to refinance your ARM. If you have a lot of credit card debt that you want to get rid of, it’s a smart idea to use your mortgage loan to do it; the interest on your credit cards is most likely higher than the interest rate you could get on a mortgage.
Moreover, mortgage interest is tax-deductible whereas credit card interest is not. That can be a great advantage and could save you more money.
3. Getting a Fixed Rate Mortgage
When you consider mortgage refinancing your ARM, you have to consider the current mortgage environment. Are rates going up or down? Right now, short-term rates have remained at a constant level. But that could change at any time.
You also have to know whether the rate on your ARM is about to adjust. If it is, it could go up. Or you may have been in a situation where you needed a short-term mortgage, but now are ready to move to a long-term, fixed-rate mortgage.
If you’re averse to your rate (and payment) changing, you may want to move from an ARM to a fixed-rate mortgage. A fixed-rate mortgage will guarantee that your rate and payment won’t fluctuate for up to 30 years.
4. Getting Cash Out
But refinancing can be more than just getting a fixed rate or lowering your payment. Getting cash from your home equity is another big reason to refinance. You may need to make some improvements on your home like adding a bathroom or updating your kitchen. Or you may need money to start the business of your dreams.
There are many reasons to refinance out of your adjustable rate mortgage. The best thing to do is to speak to an experienced home purchase loan expert. Ask a lot of questions so that they can find the right mortgage that fits your needs- the FREE form above will get you started.
SOURCE: Quicken Loans
Posted by Jed Moss on Apr 04 2007 under Adjustable-Rate Mortgages, Mortgage Refinancing
Adjustable-Rate Mortgage Holders: Call Your Lender Before it Calls You
The day of reckoning is near for millions of homeowners who financed their dream house or condo by taking out adjustable-rate mortgages.
Rates are resetting higher, and in some cases, the monthly payments that were so affordable in 2004 or 2005 when the loan was signed will push homeowners to their limit or beyond.
What is a borrower to do? You can try to make ends meet by cutting back on your expenses. Shut off HBO and the premium cable channels, skip your Starbucks run and bring your lunch to work rather than eating out and you might have enough to cover the bump-up in your mortgage payments.
Don’t despair. There is another way to look at this problem (a very basic way of looking at it, in fact). You, the borrower, are not powerless.
“Consumers get the feeling it is a lost cause to do anything, but it is pretty much the opposite,” said Harry H. Dinham, president of the National Association of Mortgage Brokers.
“The most motivated people are the lenders.”
Homeowners could seek a lower home loan rate or even switch to an interest-only mortgage for a spell. They might even ask for more time to pay, just as long as it does not create “negative amortization,” that is, letting the amount owed increase with each payment.
Dinham has been through six real estate cycles since 1967, and each time the real estate market goes sour, he said, consumers make the mistake of dodging their mortgage company.
But know this: Your mortgage lender does not, under any circumstances, want to get stuck with a property. They have to maintain it and then try to sell it on the open market, usually at a loss.
Some industry analysts say that it costs a bank an average of $40,000 to foreclose on a home mortgage loan. That amount gives the borrower that much more room to negotiate than they think.
About 1.1 million homeowners will lose their homes to foreclosure because of a mortgage resetting to a higher rate over the next 6-7 years.
Christopher L. Cagan, the director for research and analytics at First American CoreLogic, a mortgage research firm in Santa Ana, Calif., studied databases with information on 58 million mortgages.
He sees a wave of mortgage resets moving through the system - first mortgage loans with teaser rates, followed by subprime home loans and finally, as the decade comes to a close, loans to people with good credit.
This transition is not enough to hurt the overall economy - about $112 billion will be lost, he estimates - but it is a world of pain for the households and the people left holding the mortgages.
Continue reading in the Denver Post …
Posted by Richard Barber on Apr 03 2007 under Adjustable-Rate Mortgages, Mortgage Advice
Adjustable-Rate Mortgage Reset will Fuel Foreclosures, Study Says
About 1.1 million additional home foreclosures are expected over the next six years as adjustable-rate mortgages reset to higher payments, according to a study by research firm First American CoreLogic.
The expected $112 billion in losses won’t break the mortgage industry - but will inflict pain on lenders and borrowers affected by the defaults.
“It’s less than we spend on alcohol. It’s less than we spend on the lottery and gambling,” said Christopher Cagan, director of research and analytics, and author of the report Mortgage Payment Reset, The Issue and the Impact.
Some loans made over the past few years were designed to allow initial periods of low payments. Many of those were “teaser” loans, which called for very low initial interest rates. A large chunk of the initial low-interest and teaser-rate loans are scheduled to reset to higher and longer term rates. Some “negative amortization” loans will call for larger principal payments than the initial loan.
Many borrowers are likely to face the double-pressure of a large reset while at the same time, stagnant or fallen property values and little money down will leave many borrowers with no equity, or ownership in the residences above the home mortgage loan. That may hasten defaults and foreclosures.
The study forecasts that the defaults won’t severely hurt the economy and will account for about 0.36 percent of U.S. Gross Domestic Product. However, recent reports of default troubles in bad credit home loans helped send the stock market into a funk.
“That’s what gets the attention,” Cagan said. “The traffic report reports the accidents. It doesn’t report the normal traffic.”
The report focu
sed on single-family residences and reviewed only the impact of loans that will reset to new mortgage rates. It also assumed that prices will stay level with those at the end of 2006. However, a 1 percent rise in national prices will cause 70,000 fewer loans to be lost from reset-driven foreclosures, while a 1 percent price decline will force an additional 70,000 into foreclosure.
The U.S. mortgage industry loans about $2 trillion each year, so the loses from foreclosures may be less than one percent of total lending, the report said.
“The problem is this falls on a slice of lenders, investors and borrowers - 1 or 2 percent of them - that gets stunned,” Cagan said.
The percentage of loans resetting with negative home equity is expected to leap from 12.9 percent in 2007 to 24.4 percent in 2008. That’s when some of the most frequently used 2/28 mortgages, which called for two years of low payments and 28 years of higher payments, and 3/27 mortgages, which called for three years of low payments and 27 years of higher payments, are scheduled to reset.
Still, more than 93 percent of the 32 million single-family residences’ valuations and loans in the study had positive equity.
The 1.1 million foreclosures represents about 13 percent of the adjustable-rate mortgages originated through purchase or home mortgage loan refinance from 2004 to 2006, equaling about $326 billion in debt.
The study assumed that after all the foreclosure sales would be completed, about $112 billion would be lost.
But the study also projected that the pain would not be spread evenly. The “teaser” home purchase loan group is expected to see 32 percent of those mortgage defaults because of resetting, while 12 percent of subprime loans are expected to default. About 7 percent of market-rate adjustable loans are expected to default through resetting.
However, many lenders already are working with clients to modify terms or refinance existing loans to avoid default.
“Many lenders do not want an empty house on their hands or an empty condo, which will take them a year to sell and they have to pay maintenance, taxes and insurance,” Cagan said.
SOURCE: Yahoo Finance
Posted by Jed Moss on Mar 19 2007 under Adjustable-Rate Mortgages, Foreclosure