Foreclosures on the rise nationwide 39 percent of mortages this year still considered âhigh-riskâ ⢠Foreclosures on the rise nationwide Oct. 24: Despite the warnings from real estate experts, millions of Americans are still opting for risky, non-traditional mortgages. CNBCâs Diana Olick reports on the consequences. Nightly News By Diana Olick D.C. Correspondent CNBC Updated: 11 minutes ago WASHINGTON - Greg and Luisa Holmes bought into the promise of the real estate boom. âWhen I first walked in the door, I knew I was at home,â says Greg, recalling the moment three years ago when they bought their house. They were enticed by a new breed of mortgage â exotic, non-traditional, interest-only, option ARM â different names for low-cost, high-risk loans. âI just feel like we were not informed properly of all the loan terms,â says Luisa. They started with a âteaser rate,â just $1,700 a month. They thought it was fixed, but it wasn't. Rising rates and deferred interest have now ballooned that payment to $3,700 a month. They can't pay it, and they're not alone. Credit counselors say they're getting 10 times the concerned calls they used to. âYou need to really look into your financial situation, not listen to what mortgage brokers or lenders are telling you,â says Ting Ting Zhang, a mortgage expert with XXXX. Understanding today's mortgages, in fact, has become so difficult that the FDIC, the chief insurer for the nation's banks, has put out a pamphlet giving consumers a glossary of new terms. The first on the list: payment shock. But despite the warnings, Americans are still signing up: 39 percent of new mortgages in the first half of this year were non-traditional, compared to an average 2 percent over the last decade. An estimated $1 trillion worth of adjustable rate mortgages will reset at higher rates next year. âThose people who were banking on the house continuing to go up so that they could refinance into a different loan are really getting a little surprised right now,â says Craig Strent with Apex Home Loans. For some, it could mean default and ultimately foreclosure. Experts are predicting 1.3 million foreclosures by year's end, that's up 53 percent from last year. For Greg and Luisa Holmes, stuck with a mortgage they can't afford, that will mean selling their home and putting their dreams on hold. âI am saddened,â says Luisa. âI just feel disappointed.â
I read a post once here from some guy, maybe a joker, who knows. However, the post indicated that he was living with his parents and feeling ashamed. Would you like to be living with your parents or in the above situation?
I dont know. It would be a tough decision. For a first time home buyer it has to be painful knowing you went so far to achieve one of your biggest goals only to lose it because you didnt know what you were doing when you went to sign the papers. Many of these homebuyers these past few years only saw the costs up front and didnt realize that when it came time and their ARMs were going to adjust that they would be paying nearly 100% more. Its not going to be good when $1,000,000,000,000 worth of ARMS reset in 2007. Many will not be using their houses as ATM machines. Spending slows, GDP drops and the economy a possible Recession.
"We were not informed".... Did they just sign the papers without reading them? Did they actually sit down for an hour or so and calculate the biggest investment in their whole life? I have a hard time feeling sorry for people like this. Common sense and an ability to read should have tipped them off that their "teaser" rates were in fact just a tease. Everyone is a genius in a bull market, but when reality hits they play the blame game.
Having a home is a privilege, so is having a drivers license or being healthy. There are some people who can't pay their mortgage because of earth shaking events. Mortgage brokers, some, but certainly not all, are the used car salesman of the business; they are pushing their products on the unsuspecting. Good thing no one does that in the stock market. Usually, those who have little end up with less. Just like trading you can't ultimately teach people to have financial discipline. There is nothing wrong with renting, living with the folks, or sharing the rent. Sadly, the credit bubble is popping; I just hope all the air doesn't come out at the same time. Also, the rich get richer because those who have capital will sweep in and get all the property left behind by those who don't know any better. A typical scenario is someone who buys a house and never makes any payment and is then surprised when the bank comes for the property. They think its like a credit card. They don't understand that if you miss 3 payments, you are done. This is basic, and yet people don't know this. Knowledge is power.
Plenty of morons around that don't bother reading the fine print. I just got some spam saying I can get a 400k loan for only $917 per month. I know that a loan that size on a 30 year fixed at 6% would go for about $2,400 per month. People should just use fixed rates. These arms and interest only loans should all be eliminated. Fixed rate mortgages are all that there should be available. Sometimes the simplest product is the best product.
Everyone is a genius in a bull market, but when reality hits they play the blame game. [/B][/QUOTE] EXACTLY! People who are getting crushed and those who will be crushed will ultimately lay the blame on their mortgage broker/banker/loan originator....
Part of me doesn't feel at all sorry for these folks, especially if they are my neighbors and bring down the value of our neighborhood. According to my Canadian friend, stated income an no down loans aren't allowed in Canada. WTF were they thinking allowing ridiculous programs like this to exist?
if these people didn't know what they were signing they deserve to lose their house if their mortgage is adjusting