|
||
The mortgage industry has changed a lot over recent months, and is set to evolve even more in the near future. For many homeowners, particularly those who have adjustable rate mortgages (ARM) that are about to adjust, this is a very trying time. The mortgage industry, as well as the entire real estate industry, is dealing with the aftermath of what has come to be refereed to as the end of the "housing bubble".
In recent history, housing prices rose to all-time highs, with rates sitting atop the "bubble". Many people took out ARM loans with low initial rates so they could afford to buy the homes they really wanted. A few years into the loan period, faced with the prospect of rising interest rates, many homeowners began trying to refinance their loans.
In many situations, those homeowners who paid the highest prices for their homes found it difficult or impossible to get their homes refinanced, because the properties were not appraising high enough to cover the outstanding balance on their mortgage loans. People found themselves stuck with sharply increasing mortgage payments, going up to as much as double the amount of the initial payment.
With so many people stuck with homes that they could no longer afford to finance, the number of homes going in to foreclosure began to skyrocket. As people began to lose their homes, the market became flooded with property. As things go with the law of supply and demand, home prices began to decrease even more due to the increasing supply of foreclosure homes on the market.
This began a vicious cycle, since the lower market rates went on homes, the harder it became for people with ARM loans to get their homes to appraise high enough to refinance out of high payments they could not afford. The foreclosure rates continue to increase today, and aren't likely to slow down in the near future.
If you are facing an adjustment on your ARM loan in the near future, it's important to be proactive in contacting your lender for options. Don't assume that you don't have options until you discuss the possibility of a mortgage modification with your lender. Most lenders want to work with homeowners to help them avoid foreclosure whenever and however possible.
If you request a mortgage modification, you aren't actually requesting a full refinance of your current home loan. You are simply requesting that your lender work with you to change, or modify, the terms and conditions of your loan. For example, some loans may qualify for a forbearance option, which can allow homeowners a grace period to skip or postpone a few payments when facing dire financial circumstances.
In some cases, extra time can be added to your loan, so that you make lower payments for a longer period of time. Mortgage modifications aren't options for all loans, but is certainly an option worth investigating if you are facing an interest rate adjustment that will be beyond your financial means.