Some borrowers may no longer be able to afford these credit lines when they are required to begin paying both principal and interest on their balances.
WASHINGTON — Could the real estate market be heading for a new financial storm? Maybe.
Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.
That's because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory "resets" requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.
But the difference between the interest-only and reset payments on these credit lines can be substantial — $500 to $600 or more per month in some cases. If borrowers cannot afford or choose not to make the fully amortizing payments that reduce the principal debt, the bank that owns the note can demand full payment and foreclose on the house if there is sufficient equity.
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WASHINGTON — Could the real estate market be heading for a new financial storm? Maybe.
Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.
That's because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory "resets" requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.
But the difference between the interest-only and reset payments on these credit lines can be substantial — $500 to $600 or more per month in some cases. If borrowers cannot afford or choose not to make the fully amortizing payments that reduce the principal debt, the bank that owns the note can demand full payment and foreclose on the house if there is sufficient equity.
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3 comments:
Joe, thanks for keeping us up-to-date on the latest impending disasters, crisis and conspiracies. The MSM won't report any of this. Any update on the FEMA region 3 disaster?
Joe,thanks if it were'nt for you and the Blaze,I would'nt know any of this cover up stuff the elitists do.
The FEMA region 3 disaster is a hoax of epic proportion,but a hoax nonetheless.
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