A reset is when an adjustable rate mortgage goes to the next interest rate level, thus increasing the mortgage payment. Adjustable rate mortgage resets through the end of July 2007 were $197 billion (USD). That is less than what is projected for February and March – and just February and March – of 2008. The first six months of next year will see more than the total for 2007 or $521 billion. The number of foreclosures is due to rise dramatically from the already high current levels, putting more homes into a weak housing environment. So why not refinance instead? Here’s why that may be impossible.
Many homeowners will be upside down in their homes by 2008. Prices are dropping and payments on ARM’s did litle or nothing to reduce principle. There will be no traditional 30 year mortgage because there is not going to be enough equity to get a traditional mortgage.