Mortgage Reset Nightmare Recedes

This year was supposed to be the final blow to the housing market. A wave of resets of Option ARMs, Interest Only (IOs) mortgages and plain-old adjustable-rate (ARM) mortgages were supposed to lead to a surge in foreclosures, pushing down the weak housing sector as it was showing some signs of stability.

New data, however, suggest that is unlikely to happen. For one thing, people been refinancing and modifying their home loans ahead of the resets to avoid rising mortgage payments at the time of the reset. Further, many mortgages on homes that were supposed to reset this year have already gone into foreclosure.

Due to these trends, the number of outstanding Option ARMs -- the mortgage that allows for negative amortization -- have fallen from a peak of 1.05 million active loans in March 2006 to 580,000 loans outstanding at the end of 2009, according to First American CoreLogic.

So, maybe the reset threat has been cut down to size.

Vincent Fernando at The Business Insider makes the case at this link:


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