It's more than mere speculation--there is yet another wave of foreclosures looming. According to both the U.S. Treasury Department and Fitch Ratings, the housing market faces the prospect of a new round of foreclosures. 

Last week, Fitch Ratings released a report indicating that as hundreds of thousands of risky home loans known as option adjustable-rate mortgages scheduled to reset to significantly higher payments, more borrowers may be forced to fall behind. Fitch Ratings Credit Market Research provides market participants with data and analysis on default and recovery rates and broad credit trends in the fixed income markets. The Fitch Report covers only those mortgages that were securitized, meaning packaged into securities and resold.

Approximately 70 percent of the $189 billion in outstanding option ARMs will reset by 2011--according to the Fitch report, which would be another setback to the wavering housing market still attempting to recover from the mortgage meltdown that precipitated the financial crisis.

The unraveling of the option ARMs could be felt for years--even though they make up only 1.3 percent of the outstanding mortgages and were used by a far smaller segment of the population than subprime mortgages. Fortunately the fallout from the resets should not be as devastating as the initial market setback.

Additionally, Fitch estimates that $134 billion in option ARMs will reset in the next two years. It expects monthly payments to jump 63 percent on average, or $1,053 a month, for loans adjusting this year and next--prompting a rise in defaults and foreclosures.

Clearly, foreclosures and distressed properties will continue to plague the housing market over the next few years.

If you are interested in more information regarding foreclosures--specifically those within the Greenville, NC and Pitt County area, please contact The Pistol Tingen Team at (252) 321-6161.