Option Arms are the "interest only" or "pick your payment this month" loans? (who the hell came up with that idea anyhow?? not putting anything against principal, even a reverse effect on principal!)
Does anyone have an idea of the % of these mortgages due to reset that are likely to default? 5%, 50%, 80%?? I would say most would be able to refi and be fine, but with the Appraisal issues - I bet even good credit borrowers are stuck!
Sounds like Tony's song needs a solid dose of sarcasm - at least through 2015.
Many won't be able to refi because they will owe more than the property is now worth. They will be stuck with the new (higher) rate when the mortgage adjusts.
The foreclosures will hit either because the owners can't afford the new payment or they'll walk away from the house because they are so upside down on the mortgage.
Net - real estate prices are not likely to recover and in fact may fall more before 2015 in my opinion.
Yes Cap, many of the "Green Shooters" are in denial about this. You'll hear them say:
'Buh, buh, but those are adjustable loans and they'll reset to a lower interest rate.'
What these ignorant morons don't understand is that these loans were structured differently than garden variety ARMS. These loans will 'recast' to payments three time the old amount. The loans were designed to have low rates up front and were never expected to reach recast before the house was sold or refinanced.
Because these houses are so under water, 100 percent of them will default and foreclose.
But it gets worse. These loans automatically recast when the loan to value ratio hits a target of 105 to 125. This means they will recast SOONER than this chart shows. Many will be recasting this year.
Foreclosures are going to be pouring into the market for the next two years.
Robert Miller - you brought up the point of the reset if the LTV are over 100%. Which I don't dispute - I just wanted your opinion: I've heard this arguement by others who say that these mortgages have already defaulted and we won't see that big of wave. I find that incredibly hard to beleive myself.
Option Arms are the "interest only" or "pick your payment this month" loans? (who the hell came up with that idea anyhow?? not putting anything against principal, even a reverse effect on principal!)
ReplyDeleteDoes anyone have an idea of the % of these mortgages due to reset that are likely to default? 5%, 50%, 80%??
I would say most would be able to refi and be fine, but with the Appraisal issues - I bet even good credit borrowers are stuck!
They are screwed because the values are going down and they CHOSE not to pay any principal.
ReplyDeleteEnlighten an econ nerd who is nevertheless bored and confused by financial lingo. What does this chart mean?
ReplyDeleteSounds like Tony's song needs a solid dose of sarcasm - at least through 2015.
ReplyDeleteMany won't be able to refi because they will owe more than the property is now worth. They will be stuck with the new (higher) rate when the mortgage adjusts.
The foreclosures will hit either because the owners can't afford the new payment or they'll walk away from the house because they are so upside down on the mortgage.
Net - real estate prices are not likely to recover and in fact may fall more before 2015 in my opinion.
Yes Cap, many of the "Green Shooters" are in denial about this. You'll hear them say:
ReplyDelete'Buh, buh, but those are adjustable loans and they'll reset to a lower interest rate.'
What these ignorant morons don't understand is that these loans were structured differently than garden variety ARMS. These loans will 'recast' to payments three time the old amount. The loans were designed to have low rates up front and were never expected to reach recast before the house was sold or refinanced.
Because these houses are so under water, 100 percent of them will default and foreclose.
But it gets worse. These loans automatically recast when the loan to value ratio hits a target of 105 to 125. This means they will recast SOONER than this chart shows. Many will be recasting this year.
Foreclosures are going to be pouring into the market for the next two years.
It appears that Death And Destruction are closer than thought - particularly for Credite Suisse. Sell!
ReplyDeleteRobert Miller - you brought up the point of the reset if the LTV are over 100%. Which I don't dispute - I just wanted your opinion:
ReplyDeleteI've heard this arguement by others who say that these mortgages have already defaulted and we won't see that big of wave.
I find that incredibly hard to beleive myself.