Tags: mortgage | resets

Deluge of Loan Resets Will Haunt Housing for Years

By Julie Crawshaw   |   Wednesday, 09 Sep 2009 12:40 PM

Thousands of homeowners with interest-only mortgage loans are about to enter a world of hurt, and their problems could haunt the housing market for years to come.

“This is going to be the source of tomorrow’s troubles,” Keith Gumbinger, an analyst with HSH Associates, told The New York Times.

“The borrowers might have thought these were safe loans, but it turns out they bet the house.”

The number of such bets is huge: An analysis done by First American CoreLogic shows there are 2.8 million active interest-only home loans worth a combined total of $908 billion.

In the next 12 months, $71 billion of interest-only loans will reset, followed by another $100 billion the following year and $400 billion the year after that.

Typically acquired by buyers seeking to leverage their housing investment against a rising market, these loans require paying only the interest for the first few years, allowing buyers to live in homes they could not otherwise afford.

When mortgage lenders begin charging for principal as well, payments on these loans can soar by as much as 75 percent.

The fact that many homes financed in this manner are now worth less than the amount of the loans that financed them intensifies the likelihood of default and foreclosure.

David Sisko, a director at Deloitte who advises mortgage servicers, says he expects foreclosures to continue to soar as job losses make it more difficult for servicers to modify loans.

The industry is "trying to turn lemons into lemonade," Sisko told Dow Jones.

© 2017 Newsmax. All rights reserved.

1Like our page
2Share
Economy
Thousands of homeowners with interest-only mortgage loans are about to enter a world of hurt, and their problems could haunt the housing market for years to come.“This is going to be the source of tomorrow’s troubles,” Keith Gumbinger, an analyst with HSH Associates, told...
mortgage,resets
253
2009-40-09
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved