Luxury Home Owners Atop Financial Time Bomb as “Option Pay” Adjustable Rate Mortgages Reset

June 4, 2009

Millions Stretched Themselves Financially, Face Painful Adjustment, Default, Foreclosure - as Payments on Adjustable Rate Mortgages Reset.

Newport Beach, Calif. (WiredPRNews.com) — Adjustable rate mortgages (Pay Option ARM’s) were widely used in the hot housing market of recent years. Many households that took advantage of “Option Pay” loans or “teaser rate” loans – types of adjustable rate mortgages that holds down payments for an initial period or when the borrow selects a lower payment and defers interest and/or principle– are facing resets of their interest rates that can cause monthly payments to balloon upward of 65% as reported by Credit Suisse (CS). “Home owners list major payment adjustments”. For example, a one million dollar mortgage taken out 36 months ago with an initial payment of $2,528 per month could jump to just under $7,000 per month.

Sean Reynolds, Managing Director of Mortgage Loan Restructuring at the Law Offices of Joseph R. Manning, Jr., A Professional Law Corporation that focuses on loan modifications, says the handwriting is on the wall, adjustments will mean multitudes of borrowers will be unable to make the higher payments and may be forced to sell their homes, or worse, lose them to foreclosure. The firm cites statistics from 60 Minutes indicating that Option Pay Mortgages are the next wave of defaults that are now plaguing the Luxury Home Market. It’s a predictable time bomb. Reset dates indicate as much as 70% of “Option Pay” ARM loans may default over the next three years. Many home owners are now defaulting on the teaser rates indicating the inevitable when these loans reset.

Many home owners locked in rates as low as 1 percent in the early stages of their ARMs. In almost every case these mortgage payments will more than double once the rate is adjusted. And that spells tragic news for homeowners — according to Credit Suisse (CS) a third of loans are deeply delinquent and resets will begin to accelerate next spring, rising from about $4 billion resetting in March 2010 to a peak of $14 billion in September 2011. About $500 billion of option ARM loans are outstanding, according to the bank. According to CNBC 12% of all US homes are all currently delinquent.

Further compounding the problem is many types of adjustable rate mortgages (ARMs) or Pay Option ARMs carried heavy prepayment penalties that may make it difficult to refinance once the loan adjusts. Many of these loans also carried caps on the amount of interest that could be deferred causing a recast in as little as two years from the date the loan was funded.

“Consumers are in a real bind, especially in California and Florida,” said Sean Reynolds, Managing Director of Mortgage Loan Restructuring at the Law Offices of Joseph R. Manning, Jr., A Professional Law Corporation that works to modify these types of loans. “With California foreclosures up 160% since last year, and reporting $2 trillion coming up for adjustment this year alone, the demand for loan modifications will be unprecedented.”

Fortunately, Sean Reynolds has been specializing in financing solutions for over 18 years, and has worked with a broad range of clients that used Pay Option ARM to finance their homes. He is now assisting the same homeowners with loan modifications along with real estate attorney Joseph Manning.

As a civil trial attorney and real estate attorney, Joe Manning is also prepared to litigate with lenders, brokers and servicers that violate the rights of his clients. “Litigation is the last resort, but my office is prepared to litigate where appropriate,” says attorney Manning.

Based in Newport Beach, Calif., The Law Offices of Joseph R. Manning, Jr., A Professional Corporation, (http://manningloanlaw.com) is a boutique law firm that focuses on providing concierge-level service and helping consumers save their homes through mortgage modifications.

Contact: Sean M. Reynolds

450 Newport Center Drive, Ste. 200

Newport Beach, California 92660

Direct Line: 949.463.1065

www.manningloanlaw.com

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