From David Streitfeld at the New York Times: The House Trap
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.
There are a several fascinating anecdotes in the article, including a professor who teaches real estate finance. Here is one:
“I understand I took a risk,” said [Dean Janis, a Southern California lawyer who bought a $950,000 home in 2004] “But I did not anticipate that the real estate market would go down 30 percent.” He talked with Wells Fargo about his options, and the lender said he had none
He’s a lawyer, do you think he’ll bail?
File Under: It was the rational thing to do… until it wasn’t.