Refinance Options Limited for Subprime Arms
A private bit of research performed by Bank of America aims to identify the refinance options available for borrowers with subprime adjustable rate mortgages who hope to be able to refinance in order to afford the payments on their loans as they payoff mortgage notes.
Calculatedrisk reports that:
The analysis looks at both credit standards and current interest rates on alternative loans, and concludes that refinancing into a new subprime loan or, for those borrowers whose credit profile has improved since loan origination, a new Alt-A loan, is essentially not an option. The interest rates on new subprime and Alt-A, given the current environment, are simply too high to offer any improvement in the monthly payment.
The conclusion of the report? Roughly one third of home owners stand a chance of potentially qualifying for near prime alternatives as a means of getting out of their current loans. Most of their options lie with being able to qualify for government backed loans, as few private companies will touch subprime nowadays. All the rest seem to have few choices beyond staying with their adjustable rates, which unfortunately, tend to adjust upwards.
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