Mar

13

Option ARM Mortgage Defaults Hitting Long Island In 2009

Filed Under Foreclosure Info, Sellers |


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For the past 3 years, we’ve heard about mortgage defaults and lots of people talking about the “subprime loan crisis” but Option ARM mortgage defaults will shortly become the unfortunate talk of the town. Option Adjustable Rate Mortgages are mortgages that reset after a specific time to a capped mortgage rate and they adjust with market pricing.
Watch the video to get a better insight into these and similiar loans.



Now if you watched the video, you’ll get a sense of doomsday. Others that I’ve talked to about the next wave of mortgage defaults and foreclosures say the government will solve the “problem” by mandating massive loan modifications and just buying more banks.
Let’s take a look at some information first before we say the government can solve the problem.
option-arm-resets.jpg
If you look closely, you’ll see that the subprime mortgage crisis is “behind us”, although we’re still feeling the pinch from this because many of those borrowers have their homes on the market as a short sale or have already foreclosed. However, looking forward, you’ll notice a gigantic increase beginning halfway through 2009 and through 2011, that Option ARM loans and Alt A loans will see their resets begin to occur. This means those homes (many are already behind on their mortgages) will see an increase of their mortgage payments (that they can’t afford now).
The amount of these loans that were written are astounding as well. Option ARM’s make up nearly 18% of every mortgage in America (that’s nearly 2 out of every 10 household). If that doesn’t make you scratch your head and say, “Hmm”, you’re either brain dead, simply really don’t understand (call me), or you don’t care. And to get to the point of the title of this article, while I don’t have statistical data as of yet, it’s a very well-known fact that “a ton” of these types of loans were written here on Long Island. That’s where a lot of people, made a lot of money.
When you think about 50% of these loans being unable to be paid, that’s alot of loans in default. And to touch on the point about the government “saving the ‘victimized’ people from losing their homes”, who’s to say that after the government “saves” them, that they’ll continue to pay the mortgage or maybe people who are paying their mortgage will scratch their head and say, “Why am I paying my mortgage when I can be ’saved’?”
And think about this - if the government helps people to restructure their loans, eliminate portions of outstanding balances, and extends loans to…100 year fixed, all that money that is tied up in these homes is essentially “dead money”. The value of these assets to banks will be minimal.
At the end of the day, the problem is, many of these people don’t belong in homes, they belong in apartments or their parent’s homes. It’s unfortunate that this has happened, but unlike some politicians, the “dream of homeownership” is not dead and will never be dead, it just means, you’ve got to save up, work hard and earn it, not lie on a mortgage application.
The problem is…I could go off on a tangent here about state, federal and local taxation, but that’s another story. What I will do is leave you with a unique comment by my uncle who I spoke with about my website.
My uncle recently told me he visited my website. He said to me, “Tom, why do you have all this ‘negative’ information on your website? Do you think that’s going to ‘get people to list’ with you?” My response was simple. I told him, as I’ll tell my readers, the purpose of these articles and the information is here because it’s what I hear and read, and I’m going to share it - straight up - with my customers, clients and casual website visitors.
The other thing I told my uncle was, “The message of my website is for homeowners who really want to sell and still take advantage of unprecedented real estate appreciation should call me immediately. Otherwise, watch their home values quite possibly drop back to 2003 levels and then ride it out over the next five to ten years. It’s their choice.”
Unprecedented Real Estate Appreciation - click there to get a feel for how “lucky” you still are as a Long Island homeowner who bought at or prior to Januar 1, 2000.

(c) Copyright, 2009 www.tommcgiveron.com
By Thomas McGiveron, Licensed Real Estate Salesperson 1-800-765-3123, Ext. 51

WWW.LISPENDENSBYTOWN.COM


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  1. How much lower is the housing market going to go on Long Island? - New York (NY) - Page 18 - City-Data Forum on June 30, 2009 7:13 am

    […] According to the fellow I’ve linked to below the sub-prime mess is mostly behind us, but the ARMs are still the coming wave and the Island has a lot of those. Long Island Real Estate Market*|*Tom McGiveron*|*Coldwell Banker Realtors […]