2.8 million interest only mortgages that are still on the market.
Many of these loans are still very toxic and are attached to homes that are underwater. Essentially homeowners are betting that the homes are going to rise, otherwise they will be repaying a higher balance in a shorter time when the loan matures.
The odds of homes prices rising enough to get these folks above water are slim to none, which means a whole new crop of foreclosures or short sales hitting the market.
Still, interest-only loans represent an especially large problem. An analysis for The New York Times by the real estate information company First American CoreLogic shows there are 2.8 million active interest-only home loans worth a combined total of $908 billion.
The interest-only periods, which put off the principal payments for five, seven or 10 years, are now beginning to expire. In the next 12 months, $71 billion of interest-only loans will reset. The year after, another $100 billion will reset. After mid-2011, another $400 billion will reset.
John Karevoll, a longtime senior analyst for MDA DataQuick, sees the plight of interest-only owners this way: “You’re heading straight for a big wall and you can’t put the brakes on.” NYTimes.com.
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