Apr

25

Mortgage Rate Resets 2011

April 25th, 2010 | Category: Business and Marketing

I am not an economic expert, not even close, but this report by Credit Suisse published on 2007 is not to be taken lightly.

Mortgage Rate Resets 2011

Most mortgages aren’t subprime. To be sure, a disaster in 14% of the market is a huge problem in and of itself. But this graph from Credit Suisse is the most sobering thing I’ve seen in a while. Mortgage_rate_resets It shows that most of the interest rate resets ahead aren’t subprime, but are instead Alt-A and option-ARMs. Alt-A is the category of loans made to consumers with FICO scores just above the subprime threshold. Option ARMs give borrowers several payment options, including making a minimum payment that does not even cover the interest that accrued in the last month. This means it’s pretty easy for an option ARM to end up underwater, even in a market where prices are holding steady. If real estate prices are dropping, it is even more likely that an option ARM will end up upside down, which makes refinancing near impossible. The bulk of the Alt-A and option-ARM resets are coming in 2010-2011. A lot of things could change before then. But we might just be seeing the tip of the iceberg in the housing market. Source: Adam Levitin

Mortgage Rate Resets 2011

As shown in the graph above, a $1600 monthly home loan installment will snowballed into $4900 per month when the mortgage rate resets in 2011 – 2012.

Earthquake is not what brings the building down, it is the aftershocks! Whatever it is, there will be a new world order. China?

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