Many of those who watch the real estate market are feeling that the corner is being turned, and it very well might be. But there are still minefields out there. Like 2.8 million interest only mortgages that are still on the market.
I do not need to tell you that many of these loans are still very toxic and are attached to homes that are underwater. Essentially homeowners are betting that the homes are going to rise, otherwise they will be repaying a higher balance in a shorter time when the loan matures.
The odds of homes prices rising enough to get these folks above water are slim to none, which means a whole new crop of foreclosures or short sales hitting the market.
Still, interest-only loans represent an especially large problem. An analysis for The New York Times by the real estate information company First American CoreLogic shows there are 2.8 million active interest-only home loans worth a combined total of $908 billion.
The interest-only periods, which put off the principal payments for five, seven or 10 years, are now beginning to expire. In the next 12 months, $71 billion of interest-only loans will reset. The year after, another $100 billion will reset. After mid-2011, another $400 billion will reset.
John Karevoll, a longtime senior analyst for MDA DataQuick, sees the plight of interest-only owners this way: “You’re heading straight for a big wall and you can’t put the brakes on.” NYTimes.com.
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Talk to a loan officer, there are many people that can get a better loan if their current one is toxic. Sometimes the situation can be changed, but sometimes it cannot. It is much better to talk to a professional than sit around waiting for the situation to get to a point where you get foreclosed on.
-Tyler
Not to laugh at a big problem, but great picture!
I wouldn't call all of the interest only loans toxic–they are detrimental if they are adjusting to fully amortized when the home owner is not in the position to refinance or sell. Where mortgages like this become toxic is when the home owner selected the program because of chasing a low payment or trying to qualify for more home than they could afford…they didn't have a long term plan.
While many consumers are can talk to a loan officer/loan-mod expert some will be denied and still have to short-sale/foreclose.
However, the many that will be fortunate enough to get a loan modification… someone will be paying for it. The banks will have bad reports and stocks will go down affecting many in their buying power. Then some larger banks may get government help then everyone will have to pay in taxes.
On a positive note, my area is turning around and I don't think we will be affected significantly by the second wave of debt problems. People are now learning how to profit in this economy and are buying up good deals and foreclosures as they hit the market; many are "all cash" deals.
Yes, this is the final wave of foreclosures in my opinion.
The odds of home pricing sometimes depends with the market. Getting loan modification might help but make sure you be able to pay.
If you are after with the quiet life Delaware reos offers that kind of living.
Yikes. I knew there was trouble ahead but this is much more than I'd hea4rd about previously. Thanks for the heads-up
I sure hope there aren't too many of them in Sarasota Florida. We're in enough trouble as it is now
This is a prime example of people trying to "Keep up with the Jones'". Most buyers want more house than they can afford. The interest only loans provided the perfect vehicle for them to over extend themselves. Now, reckoning day has arrived for many homeowners.
As the interest only mortgages come due, it may flood the market with short sales and foreclosures. Hopefully, there will be enough buyers in the market to assume the influx of homes.
When, oh when, will they learn. Interest-only mortgages are an instant ticket to trouble nut the banks keep pushing them on people.
Yup and many of them are right here in Florida. Hang on !!
I knew there's more to the picture that is being reported but I never quite gauged that the amount of interest-only loans still out there can amount to so much. It's true, it's impossible for people to put a stop to this kind of "phenomenon" but it should also be an extreme wake up call to do something about all the foreclosures and loans that are still out for settlement. Perhaps a piece of advice – don't bite more than you can chew and well…pay for.
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