Word: optional
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...option adjustable-rate mortgage the next subprime disaster? For anyone who remembers that souring subprime loans kicked off the real estate meltdown, that's a scary thought. Recent analysis from Standard & Poor's (S&P) anticipates that a full 37.5% of such loans (dubbed option ARMs) that were written in 2007, at the height of lax lending, will eventually go bad. The kicker is that most option ARMs undergo payment spikes after five years, which means the brunt of the impact has yet to be felt. That will change in late 2010, delivering another blow to the fragile housing market...
...amount that plenty of families would find unaffordable considering nearly 1 in 10 workers is out of a job. The chart has two big peaks - the first is the rush of subprime resets that peaked in late 2007 and early 2008; the second is the upcoming wave of option ARMs, which don't hit their full reset stride until 2011. By the middle of next year, more then $10 billion worth of option ARMs will reset higher each month, according to data from mortgage tracker Loan Performance. That comes close to the figures we saw during subprime's height...
...problem with option ARMs begins with the fact that people who took out these loans were given the chance to make ultra-low payments for the first few years - and many of them did exactly that. Borrowers, mostly middle- and upper-class with good credit scores, were allowed to make payments that didn't even cover the interest owed (let alone the principal), with the understanding that payments would spike later on to make up for the shortfall. That allowed people to buy bigger, more expensive houses than they would have been able to qualify for otherwise. Plenty of families...
Some people with option ARMs have already seen their payments spike, thanks to caps on negative amortization - that is, a loan balance that grows, instead of shrinks, over time. In its report, Amherst dissected one such loan, which was written in 2007 for $465,000 over 40 years. A minimum monthly payment that started at $1,260 soon rose to $1,354 and then to $2,806, more than twice the original amount. The borrower quickly defaulted. Going forward, the bigger problem is the reset that normally comes after five years. Even without negative amortization, many borrowers will see their...
...search through various media, like radio, for her family. What's more, even though the woman who found her is poor, she has been allowed to care for the infant under the UNICEF network's supervision - largely because experts like de la Soudiere says it's often a better option to keep children in their own communities instead of giving them to wealthier families who might make them restaveks...