Mortgage and Real Estate Blog

When it comes to the foreclosure crisis - which has fallen out of the news some based on economic situations involving auto manufacturers, the H1N1 (swine flue) virus and other international situations - there has been a bit of a tendency to put the blame on adjustable rate mortgages. However, are ARMs entirely to blame?

Before anyone can say that the responsibility for the foreclosure crisis comes down to adjustable rate mortgages and the fact that some buyers weren’t fully aware of the ways in which they’d be impacted when the loans adjusted, it’s important to look at the loans themselves. Ultimately, if adjustable rate mortgages were entirely to blame, similar loans would no longer be available.

So if it isn’t just about adjustable rater mortgages, what’s to blame for the foreclosure crisis? On one hand, it’s important to look at those borrowers who though that the option they received was a little bit too good to be true; on the other, the problem is with the lenders who were “comfortable” with saying that borrowers had a larger income, more resources to work with or who “played with” the numbers on the application a bit more.

In other words, it’s impossible to say that the only problem that led to the foreclosure crisis involves adjustable rate mortgages. As a result, if you’re looking into buying a home, you may still want to think about these loans as an option - just make sure that you’re working with a mortgage lender you feel comfortable with. That simple step will ensure that you’re on your way to getting a great home and that you will be able to stay in it.

When you’re thinking about buying a home of your own, you’re going to want to make sure that you’re thinking about the big picture - and part of that means that you’re going to need to make sure that you’re choosing the right mortgage. If you’ve paid attention to the news about the mortgage crisis, however, you’re going to want to focus on adjustable rate mortgages.

Adjustable rate mortgages have been, on many levels, a contributing factor for the collapse of the housing industry. A lot of the home owners who have found themselves facing foreclosures because they couldn’t afford to their monthly payments were the victims of adjustable rate mortgages; however, that doesn’t mean that you should necessarily stay away from adjustable rate mortgages.

In the case of those who are struggling so much now, the problem isn’t about the ARMs so much as it’s about the fine print. In other words, they only looked at the initial payments, saw that they could afford them, and didn’t think about what was going to happen when the loan reset down the road.

In other words, if you’re buying a home, you’re going to want to make sure that you’re thinking about the pros and cons of an adjustable rate mortgage. If you are only going to be keeping the home for a short amount of time or you think you’ll be able to pay off the home in a short amount of time, an adjustable rate mortgage may be the best option available to you.

For better or for worse, it’s still difficult to take a look at mortgage news and not find that there is a whole lot to be talking about. Those who are still trying to figure out the mortgage crisis - and the foreclosure crisis that has come along with it - are taking more time to look at Adjustable Rate Mortgages and to identify where the problems came from.

On many levels, the problem was a lot less about people being approved for an ARM than the amount of a mortgage they were approved for. Likewise, while there are a number of issues with the fact that many adjustable rate mortgages had extremely (and unreasonably) high reset rates built in, there are flaws that come down to the amount of money that was lent - which just might be the fault of an overly inflated real estate market, but that’s a topic for another day.

In other words, you’re likely to find that there isn’t a whole lot different in the way that adjustable rate mortgages are being evaluated, however there does seem to be a place where there is consensus building: the problem was less about those who received the loans and a lot more about the loans themselves.

In the height of what has come to be known as the mortgage crisis - back when predatory lending was something of a rule rather than the exception - one of the ways in which would be home buyers were lured in was through adjustable rate mortgages. Of course, theirs were not just any adjustable rate mortgages; instead, many of these loans were interest only payments for a while or had ballooning payments that - if the lender had been clear and up front with the borrower - were not going to be feasible by any stretch of the imagination.

If you happen to work with clients who are trying to save their homes from foreclosure, then one of the things that you’re going to need to identify - especially if your clients have adjustable rate mortgages - is whether or not your clients were the victim of predatory lending or other loan violations that would take away the lender’s right to collect on the loan. In other words, you’re going to want to be sure that you are looking into a loan audit to determine whether or not the loan is enforceable.

The more that you know about the adjustable rate mortgages that you are working with, the better the position that you will be in to support your clients - and the more that you’ll be able to do to stop foreclosure.

One of the biggest problems within the broad category of “mortgage crisis” is the fact that there are so many home owners out there who were lured in with the promise of affordable home ownership despite the fact that it would be impossible for them to make the payments once the interest only portion of repayment was over. Right up alongside that is the fact that there were adjustable rate mortgages that had rate spikes that were huge and impossible to manage and that made the home owners’ ability to pay a laughable concept.

If you find yourself in a position in which your adjustable rate mortgage payments sky-rocketed and you had no idea that the rates could - let alone would - jump that high, you might want to look into a mortgage audit that could identify whether or not your loan is even legal.

A number of the adjustable rate mortgages that were issued by predatory lenders are not even legal. If you’re in a position in which your loan has become completely unmanageable and you had no idea that the payments would jump so much, you owe it to yourself to see what you can do to get back to being the one in control.

There are plenty of people who, a few years back, found themselves thinking that adjustable rate mortgages were the ticket to their success: with an adjustable rate mortgage, after all, they found that they were going to be able to get into a home of their own and were focused on the fact that, by the time their mortgage reset, the overall interest rates associated with home loans would improve. The challenge is that, in many cases, all the talk was about rates dropping when, in reality, they went through the roof.

That’s a big part of what caused the mortgage crisis and an increase in foreclosures: when the rates on adjustable rate mortgages started to climb, home owners could no longer afford to make their monthly payments - worse still, many of them didn’t realize that there were actions that they could take that would have helped them to get out from under the strain of higher costs. Loan modification may have been the thing that they were looking for all along.

Loan modification allows mortgages to be renegotiated with a lower interest rate - typically a fixed rate over an extended term - and lower monthly payments; it will create a great outlet for those who need to get out from under their ARMs.

One of the biggest problems faced by homeowners who are affected by the mortgage crisis is simple: the payments that they owe on their adjustable rate mortgages have ballooned -going from manageable to completely through the roof. What you are going to find when you start taking a closer look at the mortgage payments that you need to make is that there’s a good chance that you will be able to take advantage of a mortgage audit.

If you have a ballooning adjustable rate mortgage, one of the things that you are going to want to be sure of is that everything was clear up front. You’re going to want to be sure that you are focusing on the paperwork that you have, the way the language of the loan has been written and other factors; if your adjustable rate mortgage payments have gone through the roof, what you are going to find is that there is a good chance that your payments can be reduced or that other chances can be made.

In other words, if you are concerned about your adjustable rate mortgage, make an effort to look into a mortgage audit; what may be found could be the solution you’ve been hoping for.

Legislation has been sitting in the Senate while Senators and Congressmen enjoyed the Fourth of July holidays off. The legislation would make it impossible to foreclose upon homeowners who can’t pay their mortgage? Should this legislation pass?

Frankly, no. If you take out a mortgage and then can’t pay then foreclosure is a necessary consequence. It protects the institution that granted you the loan for the home. You don’t actually own the home until it’s paid for. When you take out mortgage, you are assuming financial responsibility. If you can’t handle that responsibility then it should be given to someone else. That sad and sounds harsh, but it’s true. Legislators should not intervene. Doing so will hurt the economy even more than not doing anything at all.

Wachovia is back in the news as the latest mortgage company to stop offering negative amortizing loans. The Pick-a-Pay program that Wachovia was well known to offer to mortgage shoppers for new home loans is being discontinued.

This is long overdue. These loans have not been good to consumers and have resulted in an increase in foreclosures and homes going back to the lenders. That’s not just bad for home owners and the lenders. It’s bad for the economy.

Mortgage lenders are wising up to the fact that they’ve created their own failures and now it looks like the tide is about to turn in favor of common sense again.

(Source) A few mortgages have a flat rates of interest. This signifies that the initial rate of interest you see stays steady during the entire life of the mortgage. This gets rid of uninvited surprises whenever the market rate of interest abruptly increases. A lot of families budget for the first payment sum then are caught short when rates of interest ascend. A flat rate prevents this.

This is a good argument for avoiding adjustable rate mortgages and sticking to the flat rate variety. If the economy turns, and it will at some point, then you don’t have to worry about getting hit with skyrocketing mortgage payments. This is especially important if you have a fixed income.

Adjustable rate mortgages are nice if you are capable of paying down your interest and paying off the mortgage early. But you’ve got to have a healthy amount of capital available to do that. Otherwise, you are just riding the waves of the economic ocean where big ships and small boats alike can capsize on tsunamis and out of control tides. Even one small mishap can set you back for years. You have to ask yourself if you capable of handling the risk. For most people, it isn’t advisable.