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The bottom line is that consumers have experienced no more than nominal annual price increases in electricity (5 percent or less) since 1996. These small increases have been occurring at the same time that prices for oil, natural gas, propane, coal, and even firewood have skyrocketed.
No one knows for sure what will happen when the rate caps expire. Price increases are anticipated. In neighboring states of Maryland and Delaware, prices for electricity rose by about 70 percent and 50 percent, respectively, when their rate caps expired. In Maine, the increase was about 100 percent.
Unfortunately, no one is talking about the second wave of ARM resets and foreclosures…
You see, this second wave will come crashing even harder than the first. It’s made up of a type of mortgage called “Option ARMs.” These give borrowers the option of how much they want to pay during the first five or 10 years of repayment:
1) The full amortized rate, including interest and principal.
2) Interest only, or…
3) A token payment, well below the amount needed to cover the interest on the loan.
This third option causes the mortgage balance to INCREASE instead of decrease. And usually, the borrower can continue to make minimum payments until the mortgage balance increases to 125% of the original amount. That’s when the trouble begins…especially if the interest rate increases at the same time.
This is the exact situation in which many homeowners now find themselves.
Obviously, these option ARMs were supposed to be reserved for customers with better credit than those who took out subprime mortgages. But apparently, they were handed out to almost anyone who wanted them.
Originally posted by 12m8keall2c
It would seem the coming months are going to prove Quite interesting.
Originally posted by TruthWithin
Whats even more terrifying is that *if* this occurs, the Gov/Fed has ZERO ways to fight it. Interest rates are at zero and bonds are WAY out of control. When these horrors start to reset, game over.
Originally posted by TheRedneck
All this coupled with the double whammy of adding in rate increases for electricity mean that the public will be hurting worse than any of us can remember.