Powayseller wrote about this doubling of mortgage payments before (remember that most homeowners only care about monthly payments). It’s only now that the press is writting about this nutron loans.
I beleive that those types of resets, along with the inability to refinance, will cause a flood of inventory to hit the market next year and in 2008. When those homes don’t sell, we’ll see the foreclosures hit the market in 2009.
The “homeowner speculators” (that Rich wrote about) who thought that they could forever buy, sell and move up will soon get suprised without a chair to sit on when the music stops.
Quote for Article
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They got a 1.2 percent ARM in February with a monthly minimum payment of $1,372. By April, the loan rate had reset, jumping to 8.375 percent, and their loan balance had ballooned by $3,000 in just two months.
Their new monthly payment: $2,216 if they want to pay interest-only or $2,300 if they want to start paying down principal as well.
“I’d call this an obscene loan,” Adam said.
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Others aren’t so lucky. A lot end up with negative equity. That makes it very tough to refinance to a better mortgage.
Many struggle to make their new inflated payments, putting them at risk of foreclosure. And selling may not be an option to cure the financial headache given the recent leveling off, or downturn, of home prices in many markets.
