$50 Billion Worth of Mortgage Resets on October 1?!

David Bach, The Automatic Millionaire over at http://finance.yahoo.com wrote an article entitled “Making Mortgage Relief Work for You” on Monday, September 10, 2007.  He begins his article in this way:

“On Aug. 31, while many of us were getting ready for a long holiday weekend, President Bush addressed the nation about the mounting concerns in the housing market. His speech took place exactly one month before we’ll see a record-breaking $50 billion in mortgages reset to a new rate.

“That’s right, in the month of October alone, many homeowners will be forced to pay higher monthly mortgage payments than they can reasonably afford. And while this number is staggering, it’s not exactly new information — it’s been known for two years that the crisis was coming.

So once again I’m left befuddled.  In approximately two weeks, homeowners of all stripes with adjustable rate mortgages (interest only mortgages, subprime borrowers and those homeowners with weak credit and no cash reserves) will be forced to pony up more cash to keep a roof over their collective heads. We are talking about mortgages that are barely affordable to these borrowers at the margin and the specific mortgage amounts will be going up based on what the Federal Reserve sets the rate at in one week, on September 18, 2007 A.D.

So, if the Fed adjusts the prime rate significantly lower (.50 to .75 basis points), then these households that are struggling with budgetary concerns will have just a hint of fiscal breathing room.  If the Fed does nothing to the prime rate, then the stock market will go in the tank which will cause more individuals lose their jobs while their adjustable rate mortgages will reset beyond their budgetary abilities to make the monthly payments. I don’t even have to tell you what will happen if the Fed raises the prime rate (which is unlikely but still one of three options)!

$50 billion in mortgages resetting in approximate two weeks is no small number!  If you are a homeowner who wants to get out of your home as quickly as possible because your mortgage loan was financed with an adjustable rate mortgage, perhaps you should consider putting a nice-looking sign in the front yard that says “Owner Will Finance”.  It’s far better to sell your home quickly and save what is left of your credit rating than it is to be one of thousands in your community with homes will be foreclosed upon as unaffordable to the previous owner.  Cut your losses now, owner finance!

If you want to read about the insanity, you can find the article here:  http://finance.yahoo.com/expert/article/millionaire/44325;_ylt=AoTOcJvZlFNtN8_7j3ushbG7YWsA
 

Best in Success,
Maria Fee
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Trading Financial Futures TM
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