Are Sub-Prime Foreclosures High Because People Lost Their Jobs or Because The Loans Reset to Much Higher Rates
Question:
Are foreclosures up so high because people lost their jobs?
Or are foreclosures so high because the loans adjusted to such a high rate of interest that people are unable to make the payments? If so, about how many percentage points did the "reset" go up compared to the initial terms?
Were the size of the "resets" much higher than would have been expected? Or were the resets no surprise?
Answer:
Most subprime foreclosure appear to be from uninformed consumers. Consumers who did not prepare for the 2 to 5% intrest rate increases and people on fixed incomes.
Yes, many people have become unemployed and yes, many more foreclosures are due to divorce. (Especially in areas with military bases.)
The problem is that unethical mortgage brokers and real estate sales people, put consumers into homes they couldn't afford and would never be able to afford and didn't fully explain the contracts to these people.
It's sad really, but I always say what you do today will affect millions of people you do not even know. (Look at what this sub prime fiasco has done around the world!)
High adjustable rates. Some doubled after a year or two. They were higher than expected.
So many people want to have the big nice house to show off to the family and/or the neighbors but the slightest hiccup in their financial situation (job loss, rate adjustment) would cause them to lose their home.
It is amazing as to how close to the edge all lot of people have lived and continue to live their financial lives.
most of my clients have mortgages over $3700 after the reset, up from say "$1500" mortgage they were used 2.
that's not including property taxes, Insurance and stuff..
foreclosures will create discontent amongst the people, which will have rising crime as a result.
It isn't because of jobs, it is because of the rates, they've gone up significantly. The Fed has raised rates 17 times for several years and just now cut it for the first time. For more information on how foreclosures work and how they happen, suggested reading below.
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