Michigan Foreclosures: Shock, Awe and ARMs

A friend of mine sent me a link to a recent Detroit News article.

It talks about how rising mortgage payments are putting thousands of homeowners in extreme financial difficulties. It is pretty disturbing yet very familiar to me. You see, most people think that majority of bank foreclosures in Michigan are happening because of layoffs in the automotive industry. I have been saying for two years that that is NOT the whole story.

I know personally at least 8 people whose mortgages have jumped through the roof in the last six months and all of a sudden they are finding that making this mortgage payment is playing havoc with their money. And YES they still have their jobs. But a $1000 per month payment becomes $1400 per month payment…That is a shock to your bank account.

So how come all of these homeowners are not calling their local mortgage companies in droves to refinance and get rid of their high payments? Well they are and they are not hearing anything good coming out of other end of that phone call. Either their credit is bruised to the point where they cannot get the best rate OR the value of their home has not appreciated enough in the last 2 or 3 years to justify doing a refinance. Remember most of these folks bought these houses either No Money Down only two or three years ago. I know so far Michigan has seen staggering number of bank foreclosures in 2006. I think 2007 will break all records.

What do you think???