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The real estate ride ain't even close to being over! There will be more adjusting ARM's in 2009 than there have been in 2007 & 2008 combined. Guess which loans are most likely to default and end up in foreclosure? 2010 is looking just as bad. Until the foreclosure cycle has run its course the market cannot function normally no matter what the guv does to prop it up. On top of that, homeowners who are headed toward foreclosure are buying smaller, cheaper houses at a fixed rate BEFORE they get foreclosed upon so they can walk away from the house that is under the outrageous interest rate of their ARM.
Banks need to renegotiate (not refinance as often that is not possible due to declining values of RE) these ARM's that are due to adjust BEFORE they adjust. If they don't both homeowners and lenders are going to get flushed. Of course most banks will not do this as they will wait to be bailed out but eventually that will run out, there is not enough to bail out every bank or person.
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