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September 9, 2009

“Reset” of Interest Rates in Loan Scheme Could Trigger New Wave of Foreclosures
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Back in the United States, real estate analysts are warning of a
potential new round of foreclosures due to a risky home loan scheme that
allows consumers to choose their interest rates for a limited time. The
loans, known as option adjustable-rate mortgages, or ARMs, have been
taken out by hundreds of thousands of borrowers. They allow homeowners
to pay a low interest rate before the rates “reset” back to normal and
the principal also becomes due. A new report from Fitch Ratings says
about $134 billion in ARMs will “reset” over the next two years.
Mortgage payments would then rise an average 63 percent, or over $1,000,
each month.



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