This post is geared toward all the homeowners out there that have an option arm that is about to recast and need to get out of it. There are an estimated $182 Billion in Option Arms that are scheduled to recast in the next 3 years or 500,000 plus of you out there. 50%+ of those options arms are in California and rest is spread between Arizona, Nevada, Hawaii, and Florida. Roughly $20 Billion~ is held by Bank Of America Home Loans (formerly countrywide), $42Billion~ by Wells Fargo (formerly World Savings), and $40Billion~ with Chase (formerly Washington Mutual WAMU)

If you can’t afford your home, I suggest you short sale it and buy one that you can afford when you can qualify again. Once you see the recast schedule below you will know that you will have plenty of time to get a deal.

Even though there were mortgage brokers that sold the option arm correctly by providing the proper education and disclosures most borrowers abused the product and did not save or invest the difference. If you haven’t been doing this start doing it NOW so you are prepared for your recast and if you can’t, get ahead of the game and do a short sale now.

While 88%~ have not yet recasted most borrowers are enjoying a one (1)% payment & a current interest rate of about 4%~ most commonly (MTA+Margin) or (LIBOR+Margin). Margin is fixed & usually ranges between two-four%. (Review your mortgage statement or note and riders with your loan docs to obtain this information)

The problem is when the option arm recasts and homeowners no longer have the option of the minimum payment.

That would not be that big of a deal if the payment quadruples to 4%, right? 4% is a pretty low interest rate!

One would have to believe that interest rates are going to increase so we can start paying back all the money our govt borrowed and that the LIBOR followed by the MTA will hit at least 4%.

Meaning (4%MTA+3%Margin) =7% (wow thats not an increase that's an explosion)

Here is the ALT-A recasting schedule:

2009-2010 $6 Billion~/mo

2010-2011 $8 Billion~/mo

2011 $33 Billion~ /mo

Get ahead of the curve and act now by short selling your home while you can!

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