Who Should Be Able to Hold Onto Their Home Until the Crisis Subsides?
A key element that has aggravated the mortgage crisis is the inappropriate use of the adjustable rate loan. An adjustable loan is typically one that is fixed for a certain amount of time and then adjusts to a higher rate. Most of these loans have fixed interest rate periods of 2, 3 or 5 years. Others, however, start with very low teaser rates and adjust in as short a time as 3 months. The idea that a borrower should hold onto an adjustable loan after the fixed rate time period expires, is a fool’s strategy. Borrowers who went into these loans should have instead been made aware of the customary and typically successful strategy behind the purchase of an adjustable loan, and should have been discouraged from such a foolish undertaking by a seasoned, professional loan officer. In its most classic sense the strategy behind taking out an adjustable loan is: take advantage of a typically lower interest rate while the loan is fixed to make financial improvements and then refinance just befor
