LSM offers a variety of residential financing solutions, including conventional fixed-rate and adjustable-rate loans
; FHA, VA and A loans; jumbo mortgages; as well as non-Qualified Mortgage (Non-QM) options through its NanQ ONE Program.
For example, of the $2.11 billion of loans outstanding as of March 31, 2018, $769 million are adjustable-rate loans
that are tied to the Wall Street Journal Prime Rate or the 1-to 3-month LIBOR.
Callahan said rising interest rates have driven purchasers to adjustable-rate loans
. Fixed-rate mortgages accounted for 65.6% of second-quarter originations, down 3 percentage points from a year ago, while balloon mortgages rose to 22.9% -- twice their share three years earlier.
According to SBA Administrator Maria Contreras-Sweet, the program, "can help refinance debt from adjustable-rate loans
with significant savings to borrowers."
Capital One provided adjustable-rate loans
totaling $28 million to refinance two suburban New York shopping centers--Selden Plaza, a 229,000 s/f retail center with office space in Selden, New York, and Towne Center, a 43,000 s/f center in Glen Cove, New York.
Despite considerable debate over the reasons for the meltdown in the home mortgage industry, specifically the increase in home loan mortgage delinquencies and foreclosures starting in 2006, a consensus has emerged that an increase in the number of subprime and adjustable-rate loans
contributed to it (Calomiris 2008; Gramlich 2007).
The products will include fixed-rate and adjustable-rate loans
, jumbo loans and Federal Housing Administration (FHA) loans.
For example, a study of borrowers in certain Chicago zip codes found that "the overwhelming majority" of those who received adjustable-rate loans
had thought their loans were for fixed rates (Illinois Department of Financial and Professional Regulation Findings 2007, 3-4), while another study found that "a sizeable number of adjustable-rate borrowers report that they do not know the terms of their contracts" (Bucks and Pence 2006, 2).
The Federal Reserve issued regulations during 2008 to restrict prepayment penalties on adjustable-rate loans
, and the Dodd-Frank financial reform bill included similar provisions for adjustable- and high-interest-rate loans.
Last year, most borrowers losing their homes were on sub-prime adjustable-rate loans
The sub-prime loans, by contrast, were adjustable-rate loans
, many with prepayment penalties, and usually made through brokers.
To earn the maximum reward, brokers would entice borrowers into adjustable-rate loans
with prepayment penalties -- discouraging borrowers from refinancing with more affordable loans and assuring the original lender a handsome fee if the borrower refinanced.