Another large chunk of mortgages in the sub-prime sector is to see the reset of interest rates to rather higher rates in Seattle over the coming six months. According to experts, the resets of a large number of loans could very well mean that the numbers of foreclosures are going to continue to go up throughout the state with more home owners struggling to keep making their payments. Banks and lending institutions that are already facing a crunch could end up having more mortgages facing problems. This could very well play spoilsport to different sectors within Washington’s economy, the housing sector being the foremost.
Close to 12,600 loans in the sub-prime sector are to be reset over the coming six months in the Seattle-Tacoma-Bellevue area. This amounts to about 52 sub-prime loans remaining to be reset. With higher rates making payments unaffordable, there would be more defaults, ending up in more numbers of Seattle foreclosure homes.
Also, a large number of Alt-Loans (loans passed with no or little income proof and documentation) are to be reset at possibly higher interest rates starting in a year. Experts are watching this trend very cautiously, because not much is known about how these loans perform. Close to 78 loans of this sector, which comes up to over 17,000 loans, are to see different interest rates in the coming five years in the Seattle area.
The biggest problem with both these categories of loans is that it is impossible to analyze whether the borrowers would be able to pay back the loan at what might be a much higher interest rate when the loan is reset. Sub-prime loans have been known to see an increase of up to 6 from the loan’s existent rate.
One thing that could be a factor in these loans being refinanced is the local values of homes. If values of homes continue their downward spiral, the chances of being able to refinance to a more reasonable mortgage would be slim, thereby ending up as being part of the Seattle foreclosure homes.
Author Resource:-
Leticia Carvalho has been educated in the finer points of the foreclosures market over 5 years. Read about the following article A Watchful Eye on Seattle, Washington by Leticia Carvalho.
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