Foreclosures on the Rise, ARMs to Blame
Foreclosures are rising and everyone’s pointing the finger at the evil ARMs, which can uptick a percentage point or more when they reset. Thinking back to getting our own mortgage all of a year ago, it certainly was tempting to pay $1,000 a month less in the short run. Luckily, we resisted and went for…
Foreclosures are rising and everyone’s pointing the finger at the evil ARMs, which can uptick a percentage point or more when they reset. Thinking back to getting our own mortgage all of a year ago, it certainly was tempting to pay $1,000 a month less in the short run. Luckily, we resisted and went for the 30-year fixed, locking in a 6% rate last summer. We have a couple of very fortunate friends who took out ARMs but have enough dry powder that they can just pay off the loan if the rate gets higher than what they think they can earn in an alternative asset. Of course, the people getting screwed don’t have that option.
Lenders around the nation have seen an increase in foreclosure activity. San Diego County had 241 foreclosures in which a mortgage holder moves to take possession of a home during the first three months of 2006, 160 more than the same period in 2005, according to the county assessor’s office. Nationally, 323,102 properties entered some stage of foreclosure in the first quarter of 2006, a 38 percent increase from the previous quarter and a 72 percent year-over-year increase from the first quarter of 2005, according to the U.S. Foreclosure Market Report.
Has anyone seen foreclosure statistics for New York City?
Homeowners Feel Pinch of ARMs [Union Tribune]
I’d disagree with your cohoice of word when you end by saying “the people gettign screwed”…
They’re not getting screwed in the slightest. People with mortgages willingly sign legal contracts. No one coerces them into it. No one is trying to pull the wool over their eyes. If they default, it’s no one’s fault but their own.
Furthermore, and this is beyond my expertise, I’d expect that mortgage lenders/banks very much prefer to *avoid* foreclosures. They’re in the money lending business, not the home ownership business. It’s a huge hassle to them I expect.
I’ve heard people rail against the interest-only ARMS, how unscrupulous mrotgage brokers coerce dumb little home buyers into buying “more house than they can afford”….Look, ya gotta take responsibility for your own life and make informed choices. I took an I/O ARM at 4.75%. I make regular payments on the principal, but I decide when and how much. By the time my rate lock ends and the payment increases, I will owe alot less on my home. Oh yeah, and each time I pay down the principal my required payment decreases. They work for some people!
I live in prime Clinton Hill and have seen two properties in foreclosure nearby within the past two years or so. No ‘hood is immune to default. And default is where foreclosure begins. Even if a property doesn’t make it all the way through the process, it still bears the stigma and can be had for a discount no matter the area.
ARMs and I/O loans are fantastic when used properly.
I opted for an ARM and refinanced to a more stable product later on because I needed the extra cash for major renovations. I have no regrets getting an ARM – for me it was necessary.
I’d like to point out that that alternative financing products are not evil per se. Rather, they are bad news when used for the wrong reasons.
Hasn’t everyone been saying this all along???
I have bought several foreclosures in NYC over the past ten years… they happen more than you think they should or would, and for a variety of reasons. Health problems, marital problems, estate problems … and fraud!
Just my 2cents – Foreclosures here are
from cheaply fixed up homes that quickly have major problems and can’t sell at good price because of obvious inferior work.
And in real down market – on ‘newer’ generic condos. People pay premium for brand-new space. But when trying to resell these and market is very soft – they are now used competing against brand new.
And not to mention the fact that there are many buyers out there to buy people’s houses when they get into difficulty, so properties rarely even make it to foreclosure in NY.
anyone whose ARMs are coming due probably got it 5-7 years ago. 3 years ago min. In any case, they have a place worth a lot more than when they bought in. Can’t imagine why they wouldn’t sell before losing their home.
If there is a problem, it will be if prices head lower and people who bought in 2005-2006 need to unload in 5-7 years.
Forclosures under NYS Law are very long, expensive and difficult; you might not see an uptick for a long while here – not to mention that lenders will try anything short of a foreclosure to save $