Wednesday, December 07, 2005

Many Subprime Loans Will 'Reset' In 2007

A trio of reports looks at default rates. "Of the states with the highest number of foreclosure listings, only Georgia had an increase in new foreclosures from October to November Georgia had 1,584 new foreclosed residential properties available for sale in November, bringing its total to 5,311."

"The dramatic increase in foreclosure activity in Massachusetts is continuing unabated,' said Jeremy Shapiro. 'Based on our analysis, foreclosures are now running 35% higher in 2005 than in 2004, and we expect this to continue into the foreseeable future.'"

"Counties with the biggest YTD increases are Essex, with a 50.07% increase, Suffolk with a 45.60% increase, with Plymouth at 43.46% and Bristol at 43.01% close behind. Communities with the greatest YTD increases include Reading (250%), Burlington (200%), Seekonk (163%) and Newburyport (163%). Of towns with at least 50 foreclosures in 2004, the greatest increases were in Lawrence (113% above last year), Wareham (103% above last year), Salem (75% above last year), Methuen (73% above last year) and Medford (67% above last year)."

The Washington Post, "Mortgage delinquencies among homeowners with high-cost loans will rise by 10 to 15 percent in 2006, a new report from investment analyst Fitch Ratings predicts. 'We think borrowers will be under more stress and have more propensity to be delinquent,' said Glenn Costello, managing director of Fitch, which follows the market for bonds backed by residential mortgages. Recently, prices of such bonds have been falling, particularly those with lower-credit-quality loans."

"Costello said the increase in subprime lending meant more people could 'come under financial pressure' than in the recent past, when home values were rising. Bigger problems for borrowers will come in 2007, because many of the subprime loans that feature adjustable-rate mortgages 'reset,' or change rates, that year. People who will be 'stressed' will be those who were unable to refinance before their rates begin rising or whose home prices have fallen so that it becomes too difficult to sell and get out from under the mortgage, he said."


At 7:21 PM, Blogger LauraVella said...

There are going to be a lot of people in financial pain next year with the loan adjustment.

I personally know five people that have I/O loans or adjustables. One of my good friends has one, and she was concerned about it converting to an adjustable next year. The loan agent told her just last week it would cost her 5,000 in closing costs to refi into a fixed, and told her her I/O loan was a good rate, and that she didnt think the interest rates would go up very much! The larger the loan, the more it goes up, must be a very green agent. This is too scary for words. I cant convince her otherwise, so its best to just keep my opinions to myself.


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