From Realtor Magazine Online, Daily Real Estate News April 22, 2009
Option adjustable-rate mortgages aren’t imploding as quickly as predicted because interest rates remain at historic lows, but resets are likely to pick up next spring, according to Credit Suisse.
Option ARMs give borrowers the option of making low payments that don't even cover the interest due which is then added to the outstanding loan balance. A total of $500 billion of option ARM loans are outstanding, says the bank.
About 37.5 percent of those originated in 2005 are outstanding; 63 percent originated in 2006 are outstanding, and 82 percent of the 2007 loans remain, according to Barclays Capital.
The Mortgage Bankers Association says the impact of an increasing tide of resets will be diminished because lenders are helping borrowers refinance the option ARMs before they reset.
"I don't think this is going to be the tsunami that was forecasted a few years ago," says Keith Gumbinger, vice-president of HSH.com, a publisher of loan information. "But it's probably bigger than a ripple in a pond."
Source: BusinessWeek.com, Prashant Gopal (04/17/2009)
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