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Option Arms To Reset in 2010

By
Real Estate Agent

 

The New York Times and the San Francisco Chronicle a few days ago reported a disturbing story about foreclosures, we will be hit with another wave of foreclosures sometime in the coming year of  2010.

Deborah Lillian, a chief executive said some clients who chose option-arm loans were small business owners or seasonal workers. Joseph Mason, a banking professor said "Now all they can likely afford is the minimum payment, so they're just buying time in a dwelling until their reset date."

A house and a clock

Most of the option arm borrowers owe more that the house is worth and cannot refinance.  My question is, when will this ever end, how many bad loans are there out there? What will happen to all these people who perhaps due to no fault of there own, were misinformed about the kind of loans they signed off on?

Here is what I think, all loan officers who duped their clients into accepting these kind of loans should be made to work and pay off all these loans. I hope there is a solution to this mess.

 

 

 

 

 

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Kent Neumann
Waterstone Mortgage- An Integrity based mortgage bank - Bend, OR
Mortgage Banker

So with the 12 month treasurey index at 0.758 and a typical margin of 2.75 these people were duped into a loan with a rate of 3.51%??  Most people with option arm are not negative amortizing because the minium payment is higher than the interst only payment.

With property values dropping why the heck would you want to pay down your loan? (which is still an option with the optin arm).   Being upside down on a property has a lot more to do with the buyer buying at the wrong time or refinancing the equity of of their property than the type of loan they did.

If these people had done a 30yr fixed at 6.50% their payment would be higher and they would still be upside down on their property.  We all know the amount of loan paid down in the first 5 years of a 30 yr loan is very small. The only difference is they would have less in savings.

Sep 28, 2009 09:04 AM
Steve, Joel & Steve A. Chain
Chain Real Estate Investments & Mortgage, Steve & Joel Chain - Cottonwood, CA

Dee,  I think this could be a great opportunity for banks to refi these folks in place.  I know a few banks are doing  this now without much hassle. And they are refi's at fixed rates.  It's too early to really know what the Fed and Banks response will be. As they say it remains to be seen.  If everyone could tell the future...

Sep 28, 2009 01:29 PM
Dee Mayers
Covina, CA
San Gabriel Valley, CA

Kent/Steve, 

What the future holds remains to be seen.  I think this taught us all a lesson and that is: Don't hang your hat to high you may not be able to reach it.

Sep 30, 2009 03:16 PM