The next wave of loans due to reset in 2010 are the “Pick a Pay” Mortgage loans. The “Pick a Pay” mortgage loans are where homeowners can choose to pay less than the full monthly mortgage payment and the difference is added on as principal.
When the loan is reset in 5 or 10 years the homeowner is locked into a higher monthly mortgage payment. This may cause a higher increase in foreclosures or bankruptcy filing because homeowners will be unable to make their mortgage payments. Many banks and financial institutions offered this loan such as Wachovia, Golden West, Countrywide, Washington Mutual, First Federal Financial Corp, and Platinum Capital Group.
However, this type of loan neglected to tell homeowners that they could risk having negative amortization and could even up owning more on their home than it is worth because the loan principal would increase between 110 to 125% of the original loan amount when the loan resets.
Mortgage loan officers are worried that is may be harder to help homeowners modify their loans because there will be a large difference in their current mortgage payment and the new mortgage payment when the loan resets.
If you are currently a homeowner and do not have a fixed interest rate that remains the same over the life of the loan please read your mortgage loan agreement and contact your mortgage company to modify your loan to get a fixed interest rate. Contact a hud counselor hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call Hope Now at 888-995-4673 to get help.
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