Commanders Post at The Warpath - View Single Post - Understanding The Issues: Subprime/Housing Crisis

mlmpetert · 06-20-2008, 10:23 AM

I found this pretty interesting. The "riskiest" of the adjustables are still yet to reset.

Calculated Risk portends the next wave of delinquencies and foreclosures - prime borrowers who used adjustable-rate mortgages (ARMs) as a tool to overstep their affordability boundaries. As adjustable rates reset higher, borrowers become unable to pay. The riskiest adjustable mortgages, option ARMs, in which a borrower can choose to pay less than the monthly interest cost, only to have that difference added back to the principal of the loan, thus eating into their equity, are yet to see the majority of their resets occur. This graph shows the coming resets, and given the difficult refinancing environment and tight lending standards, it will not be pretty for the housing market.
Graph:
IMFresets.jpg (image)

06-20-2008, 10:23 AM	#9
mlmpetert Playmaker Join Date: Nov 2006 Location: Richmond Posts: 3,261	Re: Understanding The Issues: Subprime/Housing Crisis I found this pretty interesting. The "riskiest" of the adjustables are still yet to reset. Calculated Risk portends the next wave of delinquencies and foreclosures - prime borrowers who used adjustable-rate mortgages (ARMs) as a tool to overstep their affordability boundaries. As adjustable rates reset higher, borrowers become unable to pay. The riskiest adjustable mortgages, option ARMs, in which a borrower can choose to pay less than the monthly interest cost, only to have that difference added back to the principal of the loan, thus eating into their equity, are yet to see the majority of their resets occur. This graph shows the coming resets, and given the difficult refinancing environment and tight lending standards, it will not be pretty for the housing market. Graph: IMFresets.jpg (image)