Tags: adjustable | rate | mortgages | reverse

Adjustable-Rate Mortgages Back in Play

By    |   Monday, 17 March 2014 12:29 PM

Adjustable-rate mortgages (ARMs), which helped contribute to the housing bust last decade, are all the rage again.

Lenders are offering ARMs at low interest rates, hoping to raise rates later on. Some ARMs stand at their cheapest levels compared with fixed-rate mortgages in more than 10 years, The Wall Street Journal reports.

The trouble came in the 2000s when lenders issued ARMs to sub-prime borrowers who couldn't afford them. But now lenders say they're issuing ARMs to more-qualified buyers who are taking out jumbo loans.

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ARMs accounted for 31 percent of mortgages originated in the $417,001-to-$1 million range during the fourth quarter, according to data prepared for The Journal by Black Knight Financial Services.

That represents the highest level since the third quarter of 2008 and a 22 percent increase from the fourth quarter of 2012.

"We're seeing a shift back to ARMs," Mike McPartland, head of investment finance at Citi Private Bank, tells The Journal. "My opinion is, it's going to continue."

While lenders are hoping for higher interest rates, borrowers are hoping that rates either stay low or they sell their homes before the ARMs reset at higher rates, the paper reports.

Another mortgage product that sank during the financial crisis is making a comeback too — reverse mortgages. Baby boomers are seeking them, as they hunt for retirement income, Reuters reports.

Reverse mortgages let homeowners borrow against their homes without having to pay any of the loan back before they move or die. Lenders issued $15.3 billion of reverse mortgages in 2013, up 20 percent from 2012, according to Inside Mortgage Finance.

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Adjustable-rate mortgages (ARMs), which helped contribute to the housing bust last decade, are all the rage again.
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2014-29-17
Monday, 17 March 2014 12:29 PM
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