Remember it was first the sub-prime market and now mortgage experts agree, adjustable rate mortgages combined with rising unemployment and falling property values could create another economic storm capable of ravaging the weak economic recovery. Here’s a quick breakdown of the ARM Storm-Tracker for those savvy short sale investors to beginning their planning:
Resetting Rates: Current interest rates are at or near historic lows with 30 year fixed mortgages below 5 percent while ARM’s are likely to readjust and drive the cost of monthly mortgage payments to double their former payments. Unfortunately, many current ARM holders do not qualify for refinancing due to changes in employment status, high loan to value ratios and increased debt to income percentages.
Evaporating Equity: Not only did millions of Americans take out Adjustable rate mortgages but they built additions and over-improved their homes based upon loans. As home values fell, so did the equity reserves required to refinance their ARM mortgages. Whether it was a first mortgage with minimal down payment or a second (and even third) mortgage, lower property values have all but erased excess equity from a large number of buyers.
Cheaper to Walk: Many homeowners are finding it less expensive to simply walk away from rapidly rising mortgage, rent for awhile then repurchase. According to industry experts, a significant number of homeowners are capable of making the mortgage payment but simply don’t desire to do so given the cost of purchasing the same home after foreclosure. Jesus Yinh of Exit Real Estate Group, said ” he has seen a trend of this happening in the mid Wilshire area of Los Angeles.” Current homeowners are eligible for FHA loans in as few as three years after default – creating an inverse incentive to continuing paying on a property worth tens (or even hundreds) of thousands dollars less than the existing mortgage.
Renting an Increased Option: Throughout the nation lenders are getting creative in order to reduce the inflow of defaulting properties on their portfolio; one of the more popular options among existing homeowners is the ability to rent your current property for a specified period of time.
ReFi with an ARM? It’s true, the FHA has a 3.87 five year adjustable rate mortgage option designed to help keep payments affordable. Unfortunately, it may simply delay the pain until interest rates continue to rise later. However, with a 2 percent cap on each adjustment/rate increase, it could conceivably buy time for those in unusual short term situations such as temporary illness, job loss of other large expenses. It also has the benefit of “buying time” for the banks and lenders who are in no hurry to acquire even more properties given the current backlog of non-performing properties in their portfolio.
What is a California short sale investor to do? Get ready for the coming wave of ARM properties to hit the market. Be sure your mindset is in place and position yourself to solve problems for both homeowners and lenders in need of a new start. Well first off, please come back shortly to http://www.shortsalewealthbuilders.com/
We can show you how to take advantage of California’s short sale market, and in 2010-2011 it will become California’s second Gold Rush… So saddle up, and get ready for the ride of your life.
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