Adjustable rates push mortgage delinquencies up

[tanyev]

WASHINGTON — More Americans fell behind on their mortgage payments at the end of last year, as they struggled in the face of rising interest rates, higher gasoline prices, and holiday credit card bills, the Mortgage Bankers Association said Thursday.

The number of Americans in arrears on their home loans rose to 4.7% in the fourth quarter, highest level since mid-2003. (Chart: Rates in all 50 states.)

Delinquent loans soared in the hurricane-stricken states of Louisiana and Mississippi. But they also rose alarmingly in a handful of Midwest states — Ohio, Indiana, and Michigan — that have suffered an exodus of manufacturing jobs.

The most tardy borrowers had bad credit histories, adjustable-rate loans, and monthly payments that are escalating as interest ratesrise. Almost 10% of those loans were in default at the end of the year.
http://www.usatoday.com/money/perfi/housing/2006-03-16-mortgage-delinquent_x.htm?csp=24

Anybody here surprised? Didn't think so.

[Tandalayo_Scheisskopf]

1. And so many of these are equity loans...

To get money to pay other bills and play and buy toys.

Someday, Americans will learn that a Porsche does not add inches of length and girth or increase bust size.

[bbinacan]

2. Anyone that chose

an adjustable rate mortgage, in a rising interest rate environment, made a bad decision. (I was going to say idiot).

[Warpy]

6. Some people did that with the knowledge that it would rise to a

preset cap so that they wouldn't be house poor, something that happens to nearly every first time house buyer in the first couple of years.

The problem is that when that cap is reached, they can watch for the paper to be sold to another lending company with a different, probably higher, cap. They'll have as good luck dealing with that kind of bait and switch as credit card holders have in dealing with interest rates jacked up to nearly 40% because they were late paying the gas bill two months in a row.

If you've got an ARM and can possibly afford to refinance to a 30 year fixed rate morgtgage, do it now. Interest rates are unlikely to go down again and there are a lot of reasons they need to go up.

Nine trillion reasons.

[napi21]

3. I feel very sorry for the people in La, and MS, but the others....

not nearly as much. If you took out an adjustable rate mtg. you knew or at least should have known, rates were most likely going to go UP! I can't give much sympathy to anyone who maxes out their borrowing power to buy a house without thinking the future could be disasterous if ANYTHING in the equation changes.

I will try to help anyone who is hit by unforseen circumstances like health problems, or job loss, but that's not what happened in a lot of these cases.

[Sadie5]

4. Buying too much house

can cause problems when the rates skyrocket. I think it during the Carter years that interest rates were sky high. Some of these people chose to buy these gosh awful monsters knowing full well that that low rate they had in the beginning would rise and now they can't pay for their mansions. There are so many foreclosures in my area right now.

[FloridaPat]

5. Reagan years. 23% home mortgage rates.

[bbinacan]

7. If I'm not mistaken

mortgage rates hit that high in 1980-1981.

[FloridaPat]

8. Funny how the mind puts all bad things into one basket. I definately

remember it being Reagan, but this neat chart shows it was at the end of Carter and the beginning of Reagan, which would put the blame on Carter.




http://mortgage-x.com/general/indexes/prime.asp