Monday, November 2, 2009

Pay Option Arms Resets and how they will impact you

Nice to see a proactive approach on the issue of the upcoming resets with Pay Options Arms. Nice going Brown, the California Attorney General. This is needed! Unfortunately because I don't think anyone who utilized one of these loans did not have the goal of refinancing at a later date. Consumers understood the possible issues, but consumers were sold that there was no way this could happen. Much less happen as quickly as it did happen.

I am curious to know if this is an attempt to avoid class actions suits against lenders. There is a loud roar growing that many believe the lenders knew the outcome and took full advantage of the consumer.

I admit it, I was a fan of this loan when it came out. It painted it a pretty picture, of the possibilities of achieving a dream. However, I did not see the draft/economics behind it. When you look at it in layers it was clearly a bad product introduced at bad a time and the consumer is the one left with a worthless asset.

The only problem, I think the office may be missing is the fact that a high percentage of the current defaults already falls into this category and there has been no program designed to help these homeowners thus far. Current loan modification attempts is a failure since in order to be approved the homeowner must qualify under the terms of a fully conventional loans at higher home values. Hello they weren't approved on those terms originally how can be approved now!

I hope to see the Attorney Generals Office really hold these lenders accountable, the only way consumers are going to keep their home and qualify for loan modifications is if the lenders reduce principle and ease income constraints. They are writing off the loss on the short sales and foreclosures but not on modifications, this is a change that could easily take place with the right effort behind it.

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