Don't worry, the mortgage clerk and real estate clerk told you when you were signing your name on the dotted line. Don't worry - you can always refinance again in a couple of years when the rate resets, and heck, by that point you'll have built up so much equity that you can take that money out and go on a cruise!
Not.
Things change my friends. The subprime implosion means liquidity dries up hasta pronto, and easy-credit standards go away. In addition, these desperate homedebtor-hamsters are looking at massive pre-payment penalties (hey, nobody told them about those!) if they try to escape.
Oh, boy, is this ending ugly. Welcome to option-ARM jail, homedebtors.
With rates on many homeowners' adjustable-rate mortgages rising, some who would like to refinance into a new loan are finding they can't.
In some cases, that is because their loan carries a prepayment penalty, which would force them to come up with thousands of dollars if they refinance in the first few years. Such penalties are common with so-called option adjustable-rate mortgages, which typically carry a low teaser rate that rises sharply after an introductory period.
Other borrowers are getting caught short by a changing housing market -- one in which home prices have flattened and lenders are beginning to tighten their standards after a long period of making mortgages easier and easier to get. The challenges are greatest for homeowners whose credit has declined since they took out their last loan and for those who have little if any equity. Some of these borrowers are still able to refinance but are finding it more costly than they expected.
These new challenges come at a time when many borrowers who took out adjustable-rate mortgages are facing higher payments. There are about $1.1 trillion to $1.5 trillion in ARMs that will face rate increases this year, according to the Mortgage Bankers Association. The MBA expects borrowers to refinance as much as $700 billion of those mortgages.
11 comments:
Question of the day to all of the reality clerks out there who haven't sold a house in 6 months and have been making a living by doing re-fi's.
What are you going to do now that almost no one can qualify for a loan?
CORRECTION: The MBA is hoping & praying that 700 billion in Toxic loans will be refied to help avoid a financial crisis.
Basically, Mortgage lenders have and are creating the "Perfect Storm" that will lead to the demise of both the mortgage lending/financial industry as we know it along with the finiancial viability of tens of thousands of American families.
This spring's selling season will launch THE PANIC.
you guys are funny
I have a friend in this situation. Last week he was attempting to lock in fixed rate loan and get out of his option arm(yes, he has only been making the lowest negative amortization payment since he bought the beast in 2005). The best his mortgage agent could do was set him up with a 5 year fixed interest only, I'm not sure of the terms after 5 years, but I am certain they're not good. His payment would jump over $400 a month with the interest only over what he is currently paying. The agent told him he could save $500 a month on his payment buy not paying the property tax monthly, but instead pay it off in a lump sum every six months. He seriously tried to pass that off as a way to save money, my fb buddy could only laugh.
Would your buddy save $1,000 a month if he paid his taxes annually?
Lenny, I'm not sure if he could save a $1000 or not, my friend never mentioned that. He said the broker only suggested deferring the payment into the future as a way to lower his monthly payment.
Youse can always go to Big Louie from Brooklyn or Fat Tony from the Bronx if youse need a loan - but it might cost youse a leg as well as an ARM
I'm a real estate investor/mortgage broker with a huge network of investors that i work with. As of the first of the year investors are being punished because of the stupidity of home buyers from the last 4 to 5 years. We are living in a catch 22. There are lots of investment opportunities in the foreclosure market at auction, but lenders have tightend the reins so much on lending to investors that they are screwing themselves. Investors are the ones that are going to keep the banks and lenders in business. The banks are going to lose 30% off the top of these houses, but they won't have to hold on too them. So wake up. Let us save the Market.
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