| It now looks like the coming wave of foreclosures will | | | | homeowners are soon going to be foreclosed upon in |
| be headed by homeowners stuck in an Option Arm, | | | | massive numbers as the majority of Neg Am loans will |
| Negative Amortization (Neg Am) loan. These are | | | | "reset" in 2010 and 2011. This is when the loan payment |
| mortgage loans whereby the homeowner has the | | | | jumps up to a mandatory principle plus full interest |
| option of paying less than an interest only payment | | | | payment amount. States where real estate values |
| and the difference is added onto the principle balance. | | | | skyrocketed between the late 1990's and 2006, such |
| In a short period of time, this causes the principle | | | | as California, Nevada, Arizona and Florida, will be |
| balance to balloon upward; often to as much as | | | | especially hard hit. Throw in the rising unemployment |
| 120-125% of the original loan balance. | | | | rate, which is now at 10.2% Nationally, and over 12% in |
| The combination of an increasing loan balance and a | | | | California and Nevada, and homeowners unable to |
| decreasing property value leaves many homeowners | | | | obtain a loan modification will find it increasingly difficult |
| owing more than their property is worth. Attempts to | | | | to keep their home. |
| refinance out of these loans are usually met with | | | | Educating yourself as a homeowner on how to |
| failure as tightening lending standards prevent a | | | | successfully complete a loan modification, is the only |
| refinancing from occurring when there's no equity in | | | | way most people with a Neg Am loan are going to be |
| the property. In addition, many of these loans were | | | | able to keep their home. 90% of all people eligible for a |
| given to people on Stated Income loan programs, | | | | loan modification are being turned down by their bank. |
| which have disappeared in the current banking climate. | | | | All that is needed to turn that around, so that 90% of |
| Currently, borrowers must prove their income to have | | | | the eligible people are successful in their loan |
| any hope of obtaining a mortgage loan. | | | | modification attempt, is the application of the right |
| The latest figures show almost 10% of all | | | | techniques and strategies. The bank must be made to |
| homeowners stuck in a Neg Am loan are now in | | | | understand the legal and financial costs of foreclosing |
| default. This is almost 3x's the default rate on loans | | | | are greater than the cost of modifying the loan. |
| which are not negatively amortized. These | | | | |