Interest only (IO) 2nd mortgage loans and equity lines of credit seemed like viable mortgage options when home prices were appreciating on a double-digit basis every year. The interest only loan allowed borrowers the option of making no principal payments for 5, 7, or even 10 years. According to federal financial regulators, about $30 billion of loans are due to “reset” meaning that the loans will no longer be interest only and will now be fully amortized.
A large number of home owners will not be able to handle the higher payments. The lender could foreclose if the loan is delinquent. It is also possible to modify or refinance.
Tougher mortgage rules taking effect January 1, 2014 could create a new wave of financial stress for families.
Your lender may not foreclose because there is no equity to recover. However, they may charge off the loan and then sell the loan to a what I call hard money debt buyer or a debt collection agency; both which could spell more trouble for you.
I highly recommend that you take action NOW. Before it becomes a serious problem. We can help develop a strategy to prevent a problem 562-427-8877