Monday, September 18, 2006

Nontraditional Mortgages Increasing

From the Wall Street Journal:

Use of Nontraditional Mortgages Is Edging Higher, Poll Indicates

Use of several types of nontraditional mortgages has increased among home buyers, according to a Wall Street Journal Online/Harris Interactive personal-finance poll.

The survey found increased usage of three of four types of nontraditional mortgages, which can be riskier for consumers than standard fixed-rate or adjustable-rate mortgages. The survey examined the mortgages used by people who had bought a home within the past three years.

The online poll of 2,790 adults found that 9% of recent home buyers obtained a payment option mortgage, compared with 4% in a survey conducted last year. These loans, also known as option ARMs, give borrowers as many as four payment choices each month, including a minimum payment set once a year, an interest-only payment, and what would be the standard payment on a 15-year or 30-year mortgage.

So-called piggyback mortgages, which combine a standard first mortgage with a home-equity loan or line of credit, were used by 12% of home buyers in the latest survey, up from 10% last year. And the share of home buyers using miss-a-payment mortgages edged up one percentage point to 3%. These loans let borrowers skip as many as two mortgage payments a year and 10 payments over the life of the loan with no impact on credit rating.

The overall use of interest-only mortgages fell to 14% in the latest poll from 17% last year. For homebuyers ages 18-34, though, the percentage rose to 23% this year from 16%, the poll showed.

At the same time, 15% of those who own homes said they had obtained a home-equity loan recently. Just over half of those said the purpose of the loan was to make home improvements, while 38% said it was to pay off credit-card debt and 11% said it was to help finance the purchase of a second home.

Of the 7% of Americans who said they currently own a second home, 40% said they bought it for use on weekends and vacations, according to the poll. Eighteen percent said they use their second home for rental income, while 17% said the second home was an investment and 15% said they would use the home in retirement.

7 Comments:

Blogger emphaticus said...

This may sound like a radical proposition, but maybe we should force prospective mortgagers to be tested before they take out these loans. Make it kind of like getting a driver's license. For the final exam, I'm picturing a little Clockwork Orange type of cinematic experience: strap them to a chair, pry their eyeballs open, and force them to experience the agony of debt counseling, bankruptcy, lawyers, and finally, the sheriff's department when they put your bed out onto the street.

9/18/2006 11:22:00 AM  
Blogger Shailesh Gala said...

Latest NAHB data,

THE NAHB/WELLS FARGO HOUSING MARKET REGIONAL INDICES

The northeast numbers are following.

Apr 50
May 47
Jun 41
Jul 37
Aug 34
Sep 28

The sentiment still going down, no end in sight yet.

9/18/2006 12:15:00 PM  
Blogger grim said...

Thanks SG, opened a new thread on the NAHB numbers.

grim

9/18/2006 12:25:00 PM  
Blogger mkost123 said...

look at this:
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B843C8E17%2DB688%2D452B%2D96A8%2D524381ACC223%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo

9/18/2006 12:27:00 PM  
Anonymous Anonymous said...

Shailesh Gala said...
Latest NAHB data


Great find.

Any RE pimps have anything to say?

I know I know RE will not go down more than 5% or will you change your tune and start saying 10% and when will you be saying 30%?

Ride it down to the bottom. Nosedive into the ground.

Buy and regret it.

9/18/2006 01:07:00 PM  
Anonymous Anonymous said...

SG,

Great find.

I guess those #'s would be reason to celebrate if they were your golf game, after the first 7.

BC Bob

9/18/2006 02:17:00 PM  
Blogger Firoz Khan said...

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8/18/2015 05:25:00 AM  

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