In a previous post, we talked about our concerns regarding the number of families in 2010 that were going to have their Option ARM mortgages resetting or recasting. The term ‘reset’ deals with the change of interest rate. The term ‘recast’ deals with the actual change in the mortgage amount. In either case their mortgage payment could be affected.  And at a time of tremendous financial hardship, many families’ mortgage payments could increase… some of them rather dramatically.

Why will this be a challenge in 2010?

We only have to look at the chart below to see that many loans will be impacted over this year and next:

This will be an ongoing concern in 2010.  SNL reported recently a quote from Greg McBride, senior financial analyst at Bankrate.com:

“The avoidable scenario is interest rates start to go up over the next couple of years, and all of a sudden, millions of homeowners who are stuck in adjustable rate mortgages and haven’t been able to refinance out of them become sitting ducks for big payment increases. And then here we go again. It’s like 2007 all over again.”

Will this be a challenge in my state?

Here is a graph showing the percentage of Option ARMs in each state. The darker blue your state is the higher the percentage.

What does this mean to you?

Again we are talking about an increased number of people who will have difficulty paying their mortgage. That will lead to an increase in housing industry as these families are either forced to sell or lose their home to the bank. Any increase in housing inventory will have an impact on pricing.