“In San Francisco, Marc Geshekter, a broker with Residential Pacific Mortgage, said of his ARM customers: “A lot of them are just taking out a new five-year ARM at 6 or 6.25 percent rather than taking a chance on the current loan adjusting upward. Maybe they had a three-year ARM before, so they’re opting for a slightly longer-term loan because they’re wishing they had a few extra years now.”
[So some borrowers are able to prolong the inevitable…]
[…while others are stuck in depreciated homes]
“Mr. Parnell used an example of buyers who had used ARM’s to buy homes in new developments last year, only to be facing payments they cannot afford. They would sell their houses to rid themselves of the loan, but the builders in those developments are selling off the last of their new homes for much less than what buyers paid last year, leaving the buyers with ARM’s little choice but to drop their resale prices sharply to compete.” They give an example of a homeowners whose $410K house (purchased 4/05) is now sold by the builder for $325K!
The story describes one borrower who refinanced into a fixed rate loan, erasing all the savings she had from her ARM for 3 years.
