Foreclosures on the rise nationwide
39 percent of mortages this year still considered âhigh-riskâ
⢠Foreclosures on the rise nationwide
Oct. 24: Despite the warnings from real estate experts, millions of Americans are still opting for risky, non-traditional mortgages. CNBCâs Diana Olick reports on the consequences.
Nightly News
By Diana Olick
D.C. Correspondent
CNBC
Updated: 11 minutes ago
WASHINGTON - Greg and Luisa Holmes bought into the promise of the real estate boom.
âWhen I first walked in the door, I knew I was at home,â says Greg, recalling the moment three years ago when they bought their house.
They were enticed by a new breed of mortgage â exotic, non-traditional, interest-only, option ARM â different names for low-cost, high-risk loans.
âI just feel like we were not informed properly of all the loan terms,â says Luisa.
They started with a âteaser rate,â just $1,700 a month. They thought it was fixed, but it wasn't. Rising rates and deferred interest have now ballooned that payment to $3,700 a month. They can't pay it, and they're not alone. Credit counselors say they're getting 10 times the concerned calls they used to.
âYou need to really look into your financial situation, not listen to what mortgage brokers or lenders are telling you,â says Ting Ting Zhang, a mortgage expert with XXXX.
Understanding today's mortgages, in fact, has become so difficult that the FDIC, the chief insurer for the nation's banks, has put out a pamphlet giving consumers a glossary of new terms. The first on the list: payment shock.
But despite the warnings, Americans are still signing up: 39 percent of new mortgages in the first half of this year were non-traditional, compared to an average 2 percent over the last decade. An estimated $1 trillion worth of adjustable rate mortgages will reset at higher rates next year.
âThose people who were banking on the house continuing to go up so that they could refinance into a different loan are really getting a little surprised right now,â says Craig Strent with Apex Home Loans.
For some, it could mean default and ultimately foreclosure. Experts are predicting 1.3 million foreclosures by year's end, that's up 53 percent from last year. For Greg and Luisa Holmes, stuck with a mortgage they can't afford, that will mean selling their home and putting their dreams on hold.
âI am saddened,â says Luisa. âI just feel disappointed.â
39 percent of mortages this year still considered âhigh-riskâ
⢠Foreclosures on the rise nationwide
Oct. 24: Despite the warnings from real estate experts, millions of Americans are still opting for risky, non-traditional mortgages. CNBCâs Diana Olick reports on the consequences.
Nightly News
By Diana Olick
D.C. Correspondent
CNBC
Updated: 11 minutes ago
WASHINGTON - Greg and Luisa Holmes bought into the promise of the real estate boom.
âWhen I first walked in the door, I knew I was at home,â says Greg, recalling the moment three years ago when they bought their house.
They were enticed by a new breed of mortgage â exotic, non-traditional, interest-only, option ARM â different names for low-cost, high-risk loans.
âI just feel like we were not informed properly of all the loan terms,â says Luisa.
They started with a âteaser rate,â just $1,700 a month. They thought it was fixed, but it wasn't. Rising rates and deferred interest have now ballooned that payment to $3,700 a month. They can't pay it, and they're not alone. Credit counselors say they're getting 10 times the concerned calls they used to.
âYou need to really look into your financial situation, not listen to what mortgage brokers or lenders are telling you,â says Ting Ting Zhang, a mortgage expert with XXXX.
Understanding today's mortgages, in fact, has become so difficult that the FDIC, the chief insurer for the nation's banks, has put out a pamphlet giving consumers a glossary of new terms. The first on the list: payment shock.
But despite the warnings, Americans are still signing up: 39 percent of new mortgages in the first half of this year were non-traditional, compared to an average 2 percent over the last decade. An estimated $1 trillion worth of adjustable rate mortgages will reset at higher rates next year.
âThose people who were banking on the house continuing to go up so that they could refinance into a different loan are really getting a little surprised right now,â says Craig Strent with Apex Home Loans.
For some, it could mean default and ultimately foreclosure. Experts are predicting 1.3 million foreclosures by year's end, that's up 53 percent from last year. For Greg and Luisa Holmes, stuck with a mortgage they can't afford, that will mean selling their home and putting their dreams on hold.
âI am saddened,â says Luisa. âI just feel disappointed.â
Usually, those who have little end up with less. Just like trading you can't ultimately teach people to have financial discipline. There is nothing wrong with renting, living with the folks, or sharing the rent. Sadly, the credit bubble is popping; I just hope all the air doesn't come out at the same time. Also, the rich get richer because those who have capital will sweep in and get all the property left behind by those who don't know any better. A typical scenario is someone who buys a house and never makes any payment and is then surprised when the bank comes for the property. They think its like a credit card. They don't understand that if you miss 3 payments, you are done. This is basic, and yet people don't know this. Knowledge is power.