As far as the reset of adjustable rate mortgages goes, it’s a case of good news, bad news this year.
First, the good news: it appears those mortgages won’t suffer a crash, as many experts had forecast.
But the bad news is that the crash won’t occur because many homeowners already have defaulted on these mortgages.
"The peaks of the reset wave are melting very quickly because the delinquency and foreclosure rates on these are loans are already very high," Sam Khater, senior economist at First American CoreLogic, told The Wall Street Journal.
So it’s not as if the housing market is suddenly rebounding.
The problems posed by the resetting of adjustable rate mortgages (ARMs) pales in comparison to the problem of the millions of homeowners who are "underwater," Khater says. Homeowners are underwater when their house is worth less than the value of their mortgage.
Defaults aren’t the only factor holding down the impact of mortgage resets this year.
Lower-than-expected interest rates and mortgage relief programs around the country are lessening the burden for ARMs owners too.
The S&P/Case-Shiller home price index unexpectedly rose 0.3 percent in January from December, but many experts don’t expect that to last.
“It’s a temporary stabilization,” housing analyst Joseph Brusuelas told Bloomberg.
“Foreclosures are still going to bite the market. Given the preponderance of negative housing data, we may see another leg down.”
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