"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.
In the past I wrote about how dangerous ARMs can be, and I really should have specifically highlighted option ARMs at that time, because they're the really messy ones. With these products payments are very low at first, only to increase substantially once the reset occurs. The new payments are sometimes even several times as great as the old ones.
It will be interesting to see how this new wave of underwater homeowners affects the Obama administration's mortgage modification program. I've noted that the program has found modifying as many mortgages as it would like to be challenging. With a new flood of applicants, I doubt it will get any easier for banks and servicers to handle the workload.
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