A Cautionary Tale About Adjustable Rate Mortgages
Wrenching loss of foreclosure expected to rise : The Morning Call Online: "In 2003, Anita Britten refinanced her two-story brick cottage in Lithonia, Ga. using a hybrid adjustable rate mortgage, or ARM. Her lender reassured her that she could refinance out of the riskier loan into a traditional one when her interest rate started to reset.
Three years later, Britten can't get a new mortgage and her monthly payment has jumped by a third in six months. She can't afford her payments and may face foreclosure if her financial situation doesn't change.
As more ARMs adjust upward and housing prices begin to dip, many Americans such as Britten can't refinance and are finding themselves trapped in too-high monthly payments. For those who can'tmake their payments, foreclosure is the only way out. "
Three years later, Britten can't get a new mortgage and her monthly payment has jumped by a third in six months. She can't afford her payments and may face foreclosure if her financial situation doesn't change.
As more ARMs adjust upward and housing prices begin to dip, many Americans such as Britten can't refinance and are finding themselves trapped in too-high monthly payments. For those who can'tmake their payments, foreclosure is the only way out. "
posted by Greg L at
10:31 AM
1 Comments:
Patric,
Excellent points and I certainly appreciate your facts. It's highly disturbing to consider the lack of financial literacy about these instruments.
The trillion dollar ARM reset coming up in 2007 looks like it might have a deleterious impact on our already slowing real estate markets. As most mortages are securitized and repackaged as bonds, there's a possibility that there might be a impact on the bond markets and various financial institutions if we experience widespread defaults.
Exotic financing allowed many people to buy a house that they otherwise would not be able to afford. IMO,that's where the danger lies.
Peace
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