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Paul Kiesel
Paul Kiesel
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Option ARM Loans — a Tsunami in the making

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Option ARM Loans result in class action lawsuits

Option Adjustable Rate Mortgage (ARM) loans can easily confuse consumers hundreds of thousands of whom have acquired such loans in California and throughout the United States. The Los Angeles Times first reported on May 27, 2007 just how dangerous these loans can be. Kiesel Boucher & Larson LLP initiated the first of 15 Federal Court lawsuits alleging a violation of the Truth In Lending Act (TILA). Consumers were led to believe when acquiring an Option ARM loan that they need only make the minimum interest payment in order to maintain the mortgage on their home. Nothing could be further from the truth.

Option ARM loans if only the minimum payment is made create the “perfect storm” for a consumer. Each month the borrower believes the mortgage is being covered when, in fact, paying the minimum amount due on the principal balance (this is the amount of the loan itself) actually increases the loan. As adjustable rate mortgages are about to go up, (known as recasting) as a result of a rise in interest rates, hundreds of thousands of borrowers will find themselves in extreme financial distress. TILA requires clear and concise disclosures which were not provided to borrowers at the time the loans were initiated. This is a national problem which is likely to rock the foundations of our financial markets over the next 18 months.