Kewp: Regarding tossing the keys or refinancing before the 2011 deadline: I could be wrong, but most of these individuals obtained initial payments that they could afford. There is no reason why they wouldn’t (or shouldn’t) milk the affordability portion of the toxic loan as long as they can before tossing in the keys. Given the plain terms of the contract, they may as well hold out until it is no longer affordable – i.e., when the rates adjust, before walking away. I think the majority of foreclosures are from people that can’t afford their mortgage rather than people that make a sound business decision to walk away from a depreciating asset. That’s purely a guess on my part, tho. As far as refinancing, the above-cited article speaks to that as well: “The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,” Laperriere said. “That’s pretty ugly.” If that’s the case, it would appear that refinancing may be of little help to those not able to meet the impending increased monthly payments.
SD Realtor: I agree. We can only speculate as to what those who hold mortgages that adjust in 2011 will do. Unfortunately, this particular “cycle” is unprecedented and frankly a matter of first impression for this Country. We don’t have historical norms that we can rely on to make predictions. However, we can make logical predictions based on factors other than historical real estate cycles that could prove to be accurate.
For now, I’m socking it away and just waiting for some indication that I won’t be making a huge mistake when I decide to buy. That doesn’t appear to be anytime in the near future. In the meantime, it gives me pleasure to make my monthly rental payment. By the way, I told my property manager that I’d pay 6 months in advance for a reduction and was turned down. He said they usually only accept that offer from new renters that don’t have a history of timely payments with them.
