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  • Member You - Option ARMS And Interest Only Mortgages May Be The Major Cause Of A Real Estate Market Bust

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    gram is that the terms will allow the borrower to pay a lower monthly payment at the onset of the mortgage, for a specific period of time, in exchange for higher payments and/or rates later in the term of the loan.

    Many o

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    Creative and exotic mortgage programs scare the H#@& out of the Feds, Wall Street and consumers alike! Are the lenders themselves liable for the fallout?

    Interest-Only Loans; Interest-Only Adjustable Rate Loans; Short-term Adjustable Rate Loans; Optional Payment and Payment Options Loans; and Negative Amortizing Loans… the list is long and nearly every one of these mortgage programs has as many negative risks to them as they may have positive and beneficial aspects.

    The Federal Regulators, Wall Street Mortgage Securities Firms and Mortgage Bankers know this as well. Each entity has recently issued guidance concerns to address the risks posed by these residential mortgage products that allow borrowers to delay, defer and even with some of these programs, not even pay the amount of interest that may be due in any given month. More often than not, the primary similarity in each loan program is that the terms will allow the borrower to pay a lower monthly payment at the onset of the mortgage, for a specific period of time, in exchange for higher payments and/or rates later in the term of the loan.

    Many of

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    m Adjustable Rate Loans; Optional Payment and Payment Options Loans; and Negative Amortizing Loans… the list is long and nearly every one of these mortgage programs has as many negative risks to them as they may have positive and beneficial aspects.

    The Federal Regulators, Wall Street Mortgage Securities Firms and Mortgage Bankers know this as well. Each entity has recently issued guidance concerns to address the risks posed by these residential mortgage products that allow borrowers to delay, defer and even with some of these programs, not even pay the amount of interest that may be due in any given month. More often than not, the primary similarity in each loan program is that the terms will allow the borrower to pay a lower monthly payment at the onset of the mortgage, for a specific period of time, in exchange for higher payments and/or rates later in the term of the loan.

    Many o

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    nd beneficial aspects.

    The Federal Regulators, Wall Street Mortgage Securities Firms and Mortgage Bankers know this as well. Each entity has recently issued guidance concerns to address the risks posed by these residential mortgage products that allow borrowers to delay, defer and even with some of these programs, not even pay the amount of interest that may be due in any given month. More often than not, the primary similarity in each loan program is that the terms will allow the borrower to pay a lower monthly payment at the onset of the mortgage, for a specific period of time, in exchange for higher payments and/or rates later in the term of the loan.

    Many o

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    l mortgage products that allow borrowers to delay, defer and even with some of these programs, not even pay the amount of interest that may be due in any given month. More often than not, the primary similarity in each loan program is that the terms will allow the borrower to pay a lower monthly payment at the onset of the mortgage, for a specific period of time, in exchange for higher payments and/or rates later in the term of the loan.

    Many o

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    gram is that the terms will allow the borrower to pay a lower monthly payment at the onset of the mortgage, for a specific period of time, in exchange for higher payments and/or rates later in the term of the loan.

    Many of these types of programs have been available to the consumer for quite a while. What has changed over the past few years though is that the number of lenders offering these programs and the number of consumers choosing them has significantly increased; some experts estimate by as much as 300 to 500%. In previous years, the more financially sophisticated, higher income professional or self employed business owner were targeted for these programs. The real risk and concern is that it has become the median income, standard W-2, typical middle-America borrower that has been ‘sold’ these programs more than ever before. These, for the most part are borrowers that can least afford to take on the risks.

    The greatest risks lie in a couple of arenas: Real Estate values are presumed to be flat and even declining in many areas of the country. It has been the gamble of many of the borrowers that they w

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