The Next Foreclosure Wave -- Ready For A Riding!

[peristaltor]

Eschaton brings us the new wave. Looks like we are right now in the very lowest point of the trough, with a wave of potential foreclosures looming right before us.

I mean, freakin' hell, people, an over 80% increase in mortgage payments by mid '11?

Comments

[cieldumort]

Good News: Option ARM Resets DelayedThe bad news: Low home prices and high unemployment could still punish borrowers when the reset happens sometime next year

[peristaltor]

Here's a question: are the lenders avoiding these resets because the current rate is lower than the one the borrowers are currently paying? If so, wouldn't that deny the borrowers a lower payment?

Also, are these resets or recasts? I barely know the distinction myself, but the linked article suggest strongly that the difference can be significant.

[cieldumort]

Lenders want to make the greatest premium on their risk legally available to them, that much I am sure of.

Not sure of the reset vs. recast.

[peristaltor]

Lenders want to make the greatest premium on their risk legally available to them. . . .

Exactly. That's why I ask. Correct me if I've misinterpreted the definitions, but here's my take:

If this is a delayed recast, the interest on the loans will remain static for the time being. If, on the other hand, this is a delayed reset, it simply means the increased interest is not being collected. That interest (changed by the scheduled recasts) will then accrue and further add to the debt burden described by the loans.

The payments won't change right away, but the total amount due the lender will increase over the life of the loan. The lenders make more over time, but look like forgiving angels in the eyes of the media who don't bother asking the probing questions and conveying those results.

Bastards.

[peristaltor]

Oops. I just reread:

"Reset" refers to a rate change. "Recast" refers to a payment change."

Got it backwards. Sorry.