My guess is that the ARM reset/recast schedules will actually have relatively direct impact on foreclosures. Most of the foreclosures have that already been happening were due primarily to the fact that the home-owners couldn't really afford their existing mortgage payments as it was, and were unable to do any more cash-out refis (i.e. because values are depreciating) to keep the balloon inflated.
My sister in Flrorida, for example, just lost her house which she purchased in January 2007 with an option ARM. It wasn't as if she was facing any reset just yet. However, they were struggling with even their low option ARM payment and things went from bad to worse when her partner (in construction) lost his job.
I suspect we will see a lot of these option ARM holders start to go bust LONG before the resets kick in. Heck, the vast majority of option ARM borrowers were using these products with the express purpose of allowing them to try and gorge on more debt than they could really handle.
We're falling behind on this site. The MSM has already moved on from option arms to regular old prime problems.
Here's a few choice quotes:
The delinquency rate for prime mortgages worth less than $417,000 was 2.44% in May, compared with 1.38% a year earlier,
...
Delinquencies jumped even more for prime loans of more than $417,000, so-called jumbo loans. They rose to 4.03% of outstanding loans in May, compared with 1.11% a year earlier.
about 2.8% of all homes for sale were vacant as of June 30, according to Census Bureau statistics. That's up about 50% from three years ago, and near historic highs.
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My sister in Flrorida, for example, just lost her house which she purchased in January 2007 with an option ARM. It wasn't as if she was facing any reset just yet. However, they were struggling with even their low option ARM payment and things went from bad to worse when her partner (in construction) lost his job.
I suspect we will see a lot of these option ARM holders start to go bust LONG before the resets kick in. Heck, the vast majority of option ARM borrowers were using these products with the express purpose of allowing them to try and gorge on more debt than they could really handle.
Here's a few choice quotes: