Weekly News Round-Up

Summer is not only bringing heat waves, but it will also bring 300,000 additional subprime loan resets. That’s right folks, 300,000. The Washington Post article last week reports that “Lenders, federal officials and housing counselors have worried that borrowers will not be able to afford the higher payments after the reset and will quickly fall into foreclosure. Declining home prices have made it impossible for many of these homeowners to refinance.” All total, there are 718,000 resets set to hit this year on subprime loans. The good news is that so far, only 1% of these loans has gone into foreclosure, according to Hope Now, a group monitoring the subprime debacle.

Is the news as good for those with Option ARM loans? BusinessWeek reports that Option ARM loans originating in 2006 and coming due next Spring, are already starting to default. One million resets will occur on the Option ARMs next year, and the default rate is running 2.1% thus far. The thought is that “these borrowers might simply be giving up on the mortgages because they have less and less of an incentive to keep paying.” With 70% of these loans in California and Florida, we could be in for another surge of homes coming on the market.

Oh, and did I mention that HELOCs aren’t doing so hot, either. Home Equity Lines of Credit were a popular way to pull equity and pay for college, put in that pool you’ve always wanted, or to do remodels. Unfortunately, bankers are seeing more and more delinquent accounts. In the scheme of things. 1.1% of all accounts is not so bad, but add that to the 4.5% of credit card accounts, and top if of with the Alt-A, subprime, and Option ARMS, and now you know why lenders are in a world of hurt.

While our readers have shown no love for those who agreed to subprime, Alt-A, or other loans, and are struggling to make ends meet, the debt collectors are capitalizing on their failures. And many are doing it unscrupulously. While I have never dealt with a debt collector, I have heard stories. Some good and some bad. Even if you are in good financial shape, it is worth reading the story on CNN Money, which outlines what debt collectors can and cannot do, what your rights are should you be contacted, and what is prohibited.

California Fire Update: While the firefighters are working tirelessly, and have contained over 1400 fires, right now there are 323 fires actively burning in the state. The Gallery and Basin fires just south of the Bay Area in Big Sur shut down Highway 1 over the 4th of July weekend, and continues to be closed. The fires are only about 20% contained at this time. Southern California is relatively quiet right now, with no large-scale active fires burning. Keep your fingers crossed that this continues.