Monday, July 14, 2008
ARM resets to hit peak this summer
By Renae Merle | The Washington Post
July 13, 2008
The number of homeowners facing an increase in their subprime adjustable-rate mortgage payments will peak this summer, testing the efforts of lenders and others to keep those people out of foreclosure and stabilize the housing market.
The timing reflects the height of subprime lending in the summers of 2005 and 2006, when many borrowers secured loans scheduled to adjust in two or three years. For many, an adjustment means their interest rate will go up 2 to 3 percentage points.
"The next six months, the industry, all of the folks that are out there trying to solve this problem, they are going to be very busy," said Mark Fleming, chief economist for First American CoreLogic, a California research firm. "There are a lot of people facing their resets right now. A good share of them don't have the refinance option."
Nationally, the number of subprime adjustable-rate loans resetting peaked at 7.61 percent of the loans outstanding last month, according to data from CoreLogic. More than 300,000 such loans will adjust this summer. CoreLogic's data covers about 80 percent of the mortgage market.
Lenders, federal officials and housing counselors have worried that borrowers will not be able to afford the higher payments after the reset and will quickly fall into foreclosure. Declining home prices have made it impossible for many of these homeowners to refinance.
It will not be clear for months how many will lose their homes, Fleming said. "A lot of those are resetting now," he said. "We may not see the impact in foreclosures until the middle of 2009."
Posted by Southofdub at 10:17 AM