John Leland of the New York Times has an interesting story (today) about how option ARM’s have replaced subprime as the industry bad boy.
Highlights from the New York Times article:
Mr. Clavon, 63, was planning to sell the home in a few years and retire to Palm Springs. So he got a loan called an option adjustable rate mortgage, or option ARM, which allowed him to pay less than the interest for the first five years.
On his annual salary of $100,000 as a television camera operator, he could afford the $2,200 initial mortgage payments. And he planned to sell the home before the mortgage reset.
Now Mr. Clavon is part of what many economists say is a looming threat to a housing recovery: more than a half-million option ARMs scheduled to reset in the next four years, at rates many homeowners cannot afford. His mortgage payments have risen to $2,700 a month because of a clause he did not notice on his contract, and are scheduled to rise above $4,000 in two years.
Read more: New York Times
Do you think this will have an impact on the Boston luxury condo market?
File Under: Sorry Honey, I didn’t read the fine print