http://www.youtube.com/watch?v=xQY302VdQPI
Posted on 06/18/2009 3:55:58 PM PDT by Lorianne
Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.
The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. In an option ARM, a borrower can opt to pay less than his or her monthly balance due, and the difference is tacked onto the outstanding loan balance.
Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb.
"They're probably going to default at a rate that makes subprime look like a walk in the park," warned Rick Sharga, senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.
Option ARMs have triggers that reset to a new interest rate based on either a set timeframe or when debt exceeds some cap above the loan's value. The spring drop in interest rates allowed many borrowers to escape a day of reckoning because the lower rates prevented a triggering of that cap.
That just postponed the problem, however, because most option ARMs have five-year automatic trigger dates. These loans were most prevalent in states such as California, Florida and Nevada, where home prices have sunk so far that many homeowners are underwater: They owe more than their homes are worth.
The bulk of outstanding option ARMs — a product no longer available to homebuyers — were issued between 2004 and 2007. Monthly payments on these mortgages are due to reset to a higher lending rate between 2009 and 2012.
(Excerpt) Read more at miamiherald.com ...
‘were issued between 2004 and 2007’
Joy.
Chart on the coming tsunanmi in 2010 and 2012:
http://www.freerepublic.com/focus/f-news/2269939/posts
Who`s the messiah gonna blame this one on?
That's nothing, Obama wants to continue giving out these loans to unqualified, unemployed LIARS through the CRA program, and have it run by ACORN, which caused all our problems in the first place.
That's why he want to hurry and pass this budget before this provision is noticed by media, not that they will let the public know anyways.
Nice quote from the article......If the subprime crisis hit like a heart attack, the option ARM problem is more like a worsening chronic illness.
I look at it more like if you thought the sub-prime debacle was WMD for the financial markets, the Option ARM default experience is going to be like a large asteroid strike upon the “rebuilt” financial institutions. The government knew these debts were out there......and just like vets in Vietnam, they just ignored them. They will want us to bail out these folks as well.......it is insane. The bond market will probably implode along with the Option ARM’s
The real truth is adjustable mortgage products are NOT EVIL. They are good financial instruments for people who have specific circumstances. An ARM which is tied to 1 month LIBOR and is tied to a pass through account will pay off in about 12-15 years (payment to payment) if it is matched against a common 30 year fixed rate mortgage. The rates are not the culprit....it is the amortization that kills people. We are an empire of debt here in America.......educate our children to save money and we will be mighty in 20 years.
The only thing "mighty" we will be in 20 years is mighty hungry and mighty poor as we keep paying mighty high taxes just to pay the interest on our mighty high national debt.
That's easy - Bush.
It's going to be hard to teach saving if the dollar keeps falling. It's like building a sand castle in water. One of the big problems with a levered society is that it sucks everyone in, even those who don't want to be. You are forced to speculate if you wish to save, because the unit of account is untrustworthy. (I know, there's gold, but its hard to start out with, and has a lot of fluctuation.)
http://www.youtube.com/watch?v=xQY302VdQPI
Yikes! Had not seen that.
The National Yard Sale commences.
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