Interest only mortgages are great for allowing borrowers to get into homes that they could not otherwise afford. However, when it comes time for these mortgages to reset, the new payment amounts can come as quite a shock.
Many nationwide mortgage lenders are concerned that this will cause a rise in the number of loan defaults, as borrowers are not able to afford the new payments.
Countrywide Mortgage warns of these dangers in a letter they have sent out to holders of Interest only and variable payment mortgages. In some cases, the payment will double when the loan resets and that can put families at risk. The letter also goes on to spell out some of the options for borrowers. Read the full post here on the real estate blog.