American dream

Mortgage Resets: Subprime May Be Ending, Option ARMs Have Just Begun

As a Mortgage company owner of 10 years, we never sold the pay option arm products to any of our clients, I never beleived in this loan and I would create more enemies then referrals. The big issue with this product is how it was advertised, you can still see it today, check out any webpage $300K loan for $1200 month, as a buyer how wouldnt want that, an easy sell for a loan officer who never explains what will happen if they continue to make this monthly payment. Mortgage companies offered this product based on payment and never mention rate or neg am in any article(if they do its so small you cant even see it). This loan is the main problem, most have a prepay penalty and cant even refi out of it. Others have so much negative amorization and with a declining market value there seems to be nothing we can do. Most Lenders I know of stop offering this program do to the losses in thier portfolios seem to be from the pay option arm customers. I advise anyone who has this loan product to get out of it now, or at least dont make the minimum monthy payment, choose the interest only or one of the fixed rate payments to avoid more negative amorization.