WSJ: Millions Are Facing Monthly Squeeze On House Payments

[question everything]

The Wall Street Journal

Millions Are Facing Monthly Squeeze On House Payments

Many Adjustable-Rate Loans, Popular in Recent Years, Will Soon Be Reset Higher

By JAMES R. HAGERTY
March 11, 2006; Page A1

Millions of Americans who stretched themselves financially to buy homes face a painful adjustment -- some could even lose their houses -- as monthly payments on adjustable-rate mortgages are reset higher.

In the hot housing market of recent years, many households took advantage of "affordability" mortgage loans -- heavily promoted by lenders -- that hold down payments for an initial period. Now the initial periods are coming to an end on many of these loans, leaving borrowers to face resets of their interest rates that can cause monthly payments to shoot up between 10% and 50%. More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody's Economy.com, a research firm in West Chester, Pa.

Most borrowers will be able to cope with the coming wave of resets, in some cases by refinancing with new loans, lenders and mortgage industry analysts say. But some borrowers will have trouble meeting the higher payments and may be forced to sell their homes or could lose their homes to foreclosures. A recent study by First American Real Estate Solutions, a unit of title insurer First American Corp., projects that about one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans.

(snip)

Still, a barrage of negative trends is making things tougher for already-strained borrowers. Interest rates are rising, which can increase the size of each mortgage reset and make refinancing more expensive. The housing market is cooling, making it harder to sell homes or build up a cushion of home equity. Regulators are pressing lenders to tighten their lending standards, which probably will make it more difficult for some people to qualify for refinancing. And some credit-card companies have recently started requiring higher minimum payments. Energy costs are up sharply, too, as are property taxes.

(snip)

URL for this article:
http://online.wsj.com/article/SB114204536747195612.html (subsciption)

[brokensymmetry]

1. Tell me the * admin didn't PLAN this -

with the new bankruptcy law and higher credit card payments.

[Montauk6]

2. Not that we're living large but I'm so glad we got the fixed rate

Adjustables scare me no matter HOW good the econ is.

[bleedingheart]

12. a fixed rate is the only sensible approach

I don't care what others say. with a fixed rate you know what your payments are and aside from tax increases you can stick to a budget....

[harpo]

14. yes we are, americans are living very largely outside of their means

[Ksec]

3. the housing market was never that hot

It was being propped up by flippers, who buy and sell to make a profit.

I actually did a few houses in this fashion but houses stopped moving in the past year or so. Nobody is buying. In this area people have had homes on the market for a loooong time so even the flippers have stopped . Houses got too expensive , and I see a drop coming.

[Chipper Chat]

13. I've seen several houses that have been on the market for 6 mo

or so now being offered FOR RENT. Alot of those "flippers" have dormant properties that are costing them money. Maybe those of us who are troubled by rising rent costs will see a cooling-off period.

[hatrack]

4. Why, reading this, you'd think this "WSJ" was a newspaper or something

It's almost as if they were reporting a "news" story.

:eyes:

Gotta get up pretty early in the morning to get one past Lawrence Kudlow, John Fund and the rest of the bright-eyed beavers at the Journal!!

[question everything]

6. It actually is a very good newspaper

and I have often posted stories here. I think that they will win a Pulitzer for their coverage of Katrina, the first days when the levees broke.

The editorial department, on the other hand, is a different animal, though today they do have a Wes Clark op-ed about Milosevic, I posted on the Editorial forum.

[hatrack]

8. Oh, I agree - it's just that we've been posting on this for MONTHS on DU

And in mid-March of freakin' 2006 they run a story on how rising interest rates are hurting the housing markets and squeezing ARM homeowners?

Uh, yeah.

Oh, and their editorial board is, as you note, totally freaking off-the-charts insane - like reverse Maoists in their ideological idiocy.

[tjwash]

9. I like the WSJ as well.

Except for their OP-ED section, I read it cover to cover.

[greenman3610]

18. agreed. WSJ is an excellent source of news

Their editorial staff is troglodytic.
But they hire the best reporters in the biz, and
by and large, let them report.

That's why, for activists, the WSJ is a must...
you'll always get shit if you quote some source
on the web, but make sure you can always pull
something out of the Journal. That
shuts em up.

[madrchsod]

5. i got lucky

my savings and loan isn`t in bad shape and won`t sell paper. i`m locked in for 30 years at no more than 7.5%rate will go i`m really lucky my house/insurance/taxes payments are under 550.

[Trillo]

7. Greenspan recommended people get adjustable mortgages!

Now we're told it might be bad? Gee, who did he work for? Wasn't citizens was it?

[rucky]

16. The Federal Reserve is a private entity.

little known fact.

http://en.wikipedia.org/wiki/Federal_Reserve_Board

In Lewis v. United States, 680 F.2d 1239 (9th Cir. 1982), the United States Court of Appeals for the Ninth Circuit stated that the "Federal reserve banks are not federal instrumentalities for purposes of a Federal Torts Claims Act, but are independent, privately owned and locally controlled corporations." The opinion also stated that "the Reserve Banks have properly been held to be federal instrumentalities for some purposes."

[bleedingheart]

10. Those who will be pinched the most are those who bought too much

the folks who knew when they signed the papers that they were flying too close to the sun.

It is now getting hotter and many will crash to earth.

I know these folks...middle class people...some who had houses...but they weren't grand enough...they dreamed of more. They dreamed of garden tubs and large walk in closets and not only a living room...but a living room, a grand great room and even a home office....and now they are finding that they can't sleep at night ...they think of how that grand dream is just falling away from them.

[Rainscents]

11. Here on DU... we all knew this was bad for long time and WSJ

is just now realizing this?

[wakeme2008]

15. IMHO, adjustable mortgages are a great deal ONLY IF

There is a couple point difference between it and the fix and you pay every month the fixed amount. The money you save on interest is going to the Principal and when the morgage rate is adjusted up, it is on the lesser principal amount.

[0007]

17. Just a matter of a few more months until folks will be having

their power shut off because of non payment to the utility company.

[MadHound]

19. ARMs were and are a sucker's deal

Set up to part a bunch of fools from their money. Sadly, now we're all of these chickens coming home to roost, and not only will it destroy many many middle class househholds, but it could bring down the economy as well, being as that it is the housing market along that is propping up this "great economy"