There was also further news today about Countrywide and the amount of pay option loans in their portfolio. The article about Countrywide on CNN Money states that of the $29 Billion ( I love how these large lenders throw around the B word), $26 Billion of the loans have grown beyond their original loan amount. That means that borrowers are making a payment that is less than the fully amortized payment ( that's the main attraction of the pay option ARM) and each month, with negative amortization, the borrowers loan amount is growing.
Where will this merry-go-round stop? It's anyone's guess. If you live in an area with significantly declining values, and you have a HELOC for a rainy day, you might want to go and get the cash while you can. Of course you will pay the HELOC rates for the loan. Make the decision that best supports your fiscal wellness.
Ron Margolis, RA, CDPE, ABR Hawaii Life Real Estate Services 808.346.7095 email: firstname.lastname@example.org