More foreclosures expected as mortgage rates rise
About 1.1 million additional residential foreclosures are expected over the next six years as adjustable-rate mortgages reset to higher payments.
The expected $112 billion in Mortgage Loan losses won't break the mortgage industry but will inflict pain on both lenders and borrowers affected by the defaults.
Some mortgage loans made over the past few years were designed to allow initial periods of low payments. Many of those were "teaser" loans. A large chunk of the "teaser loans" are scheduled to reset to higher and longer term rates.
Many borrowers are likely to face the double-pressure of a large reset while at the same time, stagnant or fallen property values and little money down will leave many borrowers with little or no equity in their home.
The % of home mortgage loans resetting with negative equity is expected to leap from 12.9 percent in 2007 to 24.4 percent in 2008. That's when some of the most frequently used 2/28 mortgages, which called for two years of low payments and 28 years of higher payments, and 3/27 mortgages, which called for three years of low payments and 27 years of higher payments, are scheduled to reset.
Many mortgage lenders already are working with clients to modify terms or refinance existing loans to avoid default.
The expected $112 billion in Mortgage Loan losses won't break the mortgage industry but will inflict pain on both lenders and borrowers affected by the defaults.
Some mortgage loans made over the past few years were designed to allow initial periods of low payments. Many of those were "teaser" loans. A large chunk of the "teaser loans" are scheduled to reset to higher and longer term rates.
Many borrowers are likely to face the double-pressure of a large reset while at the same time, stagnant or fallen property values and little money down will leave many borrowers with little or no equity in their home.
The % of home mortgage loans resetting with negative equity is expected to leap from 12.9 percent in 2007 to 24.4 percent in 2008. That's when some of the most frequently used 2/28 mortgages, which called for two years of low payments and 28 years of higher payments, and 3/27 mortgages, which called for three years of low payments and 27 years of higher payments, are scheduled to reset.
Many mortgage lenders already are working with clients to modify terms or refinance existing loans to avoid default.
