But then as the interest rate reset, they now became delinquent because their payments went up so much.
Of course, the partially hidden cost of that loan was the interest rate reset down the road, when it would go up.
Add the likelihood of some 1m more repossessions as adjustable-rate mortgages are reset, and you have the makings of a housing glut.
According to a comprehensive report just released by Democrats on Congress' Joint Economic Committee, 1.8 million hybrid adjustable-rate mortgages will reset within the next two years.
The mortgages start at low, initial rate but tend to reset to double-digit amounts.
Mr. GREG MC BRIDE (Financial Analyst, Bankright.com): The biggest beneficiaries of the Federal Reserves repeated interest rate cuts will be home owners that have adjustable rate mortgages due to reset in 2008.
This would reduce the reset rates adjustable-rate subprime mortgage holders would have to pay.
Adjustable-rate mortgage loans are scheduled to reset this summer and fall.
But what we were hearing and finding from a lot of our lenders, that they are hearing from a lot of borrowers who had now fallen behind because of the reset of their interest rate.
In addition, borrowers would have to receive an estimate of when a mortgage will reset at a higher interest rate and an estimate of the resulting monthly payment.
Some 2 million adjustable-rate mortgages, or ARMs, are due to reset to higher rates this year, making monthly payments unaffordable for many.
Borrowers were unable to pay the "reset" amount on their adjustable-rate mortgages.
Homeowners who took the risk of subprime and adjustable-rate mortgages increasingly cannot make higher payments as their loans reset.
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