Credit Suisse shows us 27 billion in high risk loans are resetting in June 2011. Think about that number - that's in (only) 1 month next year. Option ARMS are the majority of that 27, at 18 billion resetting in June 2011. These are the "smart pay" / "pick a pay" loans that had us scratching our heads at the settlement table wondering why anyone thought this was a good idea. The answer was simple... Values would continue to increase, so it makes sense to take a ridiculously low minimum monthly payment now. Worst case scenario is you have to sell in a few years before the balloon is due and you'll pocket a nice chunk of change for your efforts. Understandable, savvy, and responsible, right?
We know what happened though. It went the other way. Values are down, so in most cases, refinancing is out. If a mortgage payment or two are a little late, the damage to a homeowner's credit score also negates refinancing as an option.
Loan modification is the next logical step. After all, the Government is offering all types of programs right now to help homeowners, like "HAFA" (Home Affordable Foreclosure Alternatives), and HR 3648, the "Mortgage Forgiveness Debt Relief Act of 2007". A statistic homeowners should know is that about 1 in 10 homeowners will fit into the perfect loan modification model that the banks are currently approving. Out of that 1 in 10? 55% will be back in default within 6 months.
A point I'd like to stress to any homeowner experiencing financial hardship is that there is help available, for free. CENTURY 21 Pinnacle helps homeowners understand thier rights and options, for free. We never charge a homeowner any fee for this service.
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