Foreclosures Rise as California Homeowners Look for Fixed Rate Jumbo Solutions
Krista O'Connell

California foreclosures increase as homeowners struggle to find fixed mortgage rates for jumbo refinancing loan programs. During the past three years, a huge number of California homeowners from Riverside to Los Angeles who would not normally have been granted mortgages because of bad credit were given keys to their new homes. Many mortgage companies introduced more lenient mortgage lending guidelines, which increased mortgage approval rates. These approvals, however, were contingent on the homeowner accepting risky terms.

Adjustable rate mortgages offering low initial interest rates and negative amortization loans were granted to many unsuspecting California home buyers. While these loans were attractive initially, the downsides of accepting such risky loan conditions are now becoming apparent. Increasing interest rates and corresponding escalating loan payments have created a foreclosure crisis in California, a trend that is sweeping the nation in what has been dubbed the subprime mortgage meltdown.

According to Yahoo News, the foreclosure rates in California may be as high as one in every 224 households, which represents a 300% increase since August of 2006. California jumbo foreclosures on homes with mortgages that exceed the industry's traditional lending limits have also increased.


California foreclosures are sky-rocketing because borrowers can't find loan replacements for their ARM's and negative amortization loans.

The rising number of home foreclosures and loan defaults has adversely affected the entire mortgage lending industry. There are many subprime mortgage lenders going out of business and a high number of lenders going bankrupt. But it’s not only lenders who are feeling the pinch. Decreasing property values, rising California mortgage rates, and increasing adjustable rate mortgage payments combined with decreasing home equity and tighter mortgage lending guidelines are all making it difficult for financially-strapped homeowners to find California home refinance solutions.

Subprime borrowers in recent years have typically been granted adjustable rate mortgages, and many were shocked when their monthly payments suddenly increased by hundreds of dollars. The increases are especially troubling to those who took out jumbo mortgages, as even a small increase in interest on a loan worth hundreds of thousands of dollars can quickly add up. For now, the best option for those who secured mortgages with subprime lenders is to explore their fixed rate refinance options, which would keep monthly payments stable. With lenders tightening up their pocketbooks, however, finding effective refinancing solutions to escape ballooning payments is proving to be quite difficult for California homeowners.

 

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