Option Arms

Great article in Fortune on CNNMoney.com

Some say that people are more prone to just short selling and handing in their keys because their lender/broker/banker is faceless. Whereas before they would run into their local banker at the grocery store or soccer field.

Most people have a 2-4 point margin above the MTA index. Meaning right now if there loan were to recast at either the 110%, 115%, 120%, or 125% max balance (check your loan docs) the full payment would be based between 6.3-8.3%.

As short term rates continue to decline beginning with the LIBOR, flanked by the MTA and trailed by PRIME (and long term rates continue to rise due to global economic pressures) for those with adjustable rate mortgages who can hang in there long enough may see relief with some predicting full payment rates being between 4-6% by the end of the year (based on your index).

“Golden West’s loans” (World Savings then Wachovia then Wells Fargo), “option ARMs clustered in the frothy California real estate market, may take a hit from the housing downturn.”

read more | digg story

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