| after 20 yrs when the payment adjust upwards and there is only 10 years left on the note and the buyer can't afford the new payment ... the backup plan was to refinance the loan for another 20 yrs w/eligible equity ( 10 more years of income stream ) with a reduced payment or the same payment the note was set at for the first 20 years ... the buyer would not have had another option ( besides sell ) if they needed to avoid the higher payment. It would have been a win win situation for the lien holder because there is more time earning interest income especially with the prinicipal being deferred upfront w/ % only payments. This is the reason why the adjustable arm arrangements had layerd % rate caps for the first 5 - 15 years and prepayment penalties to discourage paydown. Finance / risk managers already thought this out. The only thing they didn't consider was a downturn in the economy where most of their portfolio would be impacted in the near term soon after these loans were set up.
=============Sig begins here================ The Devils Z.com 
The Devils Z Pic
666 rwhp dyno The Demon Z pic (in progress)
View Me! Disclaimer : Not Safe For Work !
|
