"Millions of Americans who stretched themselves financially to buy homes face a painful adjustment -- some could even lose their houses -- as monthly payments on adjustable-rate mortgages are reset higher.
"In the hot housing market of recent years, many households took advantage of "affordability" mortgage loans -- heavily promoted by lenders -- that hold down payments for an initial period. Now the initial periods are coming to an end on many of these loans, leaving borrowers to face resets of their interest rates that can cause monthly payments to shoot up between 10% and 50%.
"More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody's Economy.com, a research firm in West Chester, Pa.
"Most borrowers will be able to cope with the coming wave of resets, in some cases by refinancing with new loans, lenders and mortgage industry analysts say. But some borrowers will have trouble meeting the higher payments and may be forced to sell their homes or could lose their homes to foreclosures. A recent study by First American Real Estate Solutions, a unit of title insurer First American Corp., projects that about one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans.
"Resets will "eat into discretionary spending" for many Americans, says Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York."
"Resets will "eat into discretionary spending" for many Americans, says Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York."
I really feel badly for these people that over-extended themselves using these "gimmick" loans that, in my opinion, are truly designed to prey on the ignorance of the average borrower. I know I won't make a lot of friends saying this, but I don't have a lot of respect for the mortgage industry. Just like any industry, there are good and bad practitioners, but I think that particular industry is driven by money and the bottom line more than most others. Which is why that industry keeps rolling out these arcane loan products that are all designed to do one thing: get as much money into as many people's hands as possible, with little regard for whether this is truly in the best interest of the borrower.
A TRUE professional is interested in building long-term relationships with each and every one of his or her clients. You create these relationships by placing your client's interests above your own. It is very safe to say that most of the lenders that are dealing in these exotic loan products are not focused on the long term relationship.
I could go on and on, but you get the idea. The bottom line: choose your loan - and your lender - wisely! For more information on this often-overlooked topic, check out http://www.professionalone.com/buying/lender-selection.htm. I hope this information is of benefit to you!
No comments:
Post a Comment