OUCH! Your Mortgage Payment Just Doubled!
From MSN Money, OUCH! Your house payment just doubled! Key excerpts follow.
Big, fat surprises are ahead for about 20% of homeowners: The owners of about 7.7 million adjustable-rate loans taken out in 2004 and 2005 -- about $1.89 trillion worth -- face higher house payments in the next two to three years.
That's about a fifth of all mortgages outstanding in the U.S. right now. Teaser, Subprime & Option ARMS are the main culprits.
So far, just the homeowners who bought these cheap loans early, or whose introductory periods were short, have been hit. We haven't had a lot of people lose their houses to reset yet. That's proof it hasn't really bit yet.
Foreclosures in the U.S. jumped 24% from July to August. The 115,000 foreclosure filings in August were the biggest spike we've had all year -- a 53% increase in foreclosures from August 2005.
The fact is, we've never had this many of this type of loan mature all at the same time, so there really is not a precedent for this.
People who borrowed before 2003 are safest from the mortgage-reset problem, because they probably have built up equity that will help them refinance or, at worst, sell without losing money -- unless they are in a stalled real-estate market, that is.
But those with no equity are in riskier terrain. In 2005, 29% of mortgage holders had no equity or, because of borrowing, owed more than their houses were worth, a situation known as negative equity.
Nearly 11% of those with negative equity were down 15% or more below their home's value.
ARMs have been around for decades, but as recently as 1999, just half of subprime mortgages were ARMs. Now, however, ARMs -- though roughly a quarter of all U.S. mortgages -- account for three-quarters of subprime loans.
A disproportionate number of ARMs now are sliding into foreclosure. In Chicago. about 57% of the foreclosure properties were on some sort of adjustable-rate mortgage.
If that's any indicator, it suggests we could be in for a rough ride for the next couple years.
Big, fat surprises are ahead for about 20% of homeowners: The owners of about 7.7 million adjustable-rate loans taken out in 2004 and 2005 -- about $1.89 trillion worth -- face higher house payments in the next two to three years.
That's about a fifth of all mortgages outstanding in the U.S. right now. Teaser, Subprime & Option ARMS are the main culprits.
So far, just the homeowners who bought these cheap loans early, or whose introductory periods were short, have been hit. We haven't had a lot of people lose their houses to reset yet. That's proof it hasn't really bit yet.
Foreclosures in the U.S. jumped 24% from July to August. The 115,000 foreclosure filings in August were the biggest spike we've had all year -- a 53% increase in foreclosures from August 2005.
The fact is, we've never had this many of this type of loan mature all at the same time, so there really is not a precedent for this.
People who borrowed before 2003 are safest from the mortgage-reset problem, because they probably have built up equity that will help them refinance or, at worst, sell without losing money -- unless they are in a stalled real-estate market, that is.
But those with no equity are in riskier terrain. In 2005, 29% of mortgage holders had no equity or, because of borrowing, owed more than their houses were worth, a situation known as negative equity.
Nearly 11% of those with negative equity were down 15% or more below their home's value.
ARMs have been around for decades, but as recently as 1999, just half of subprime mortgages were ARMs. Now, however, ARMs -- though roughly a quarter of all U.S. mortgages -- account for three-quarters of subprime loans.
A disproportionate number of ARMs now are sliding into foreclosure. In Chicago. about 57% of the foreclosure properties were on some sort of adjustable-rate mortgage.
If that's any indicator, it suggests we could be in for a rough ride for the next couple years.
Comments