Do I have it right that if rates rise for the next couple years it would mean that make that 2nd bulge in 10/11 both resets much more painfully and that far fewer people would be able to do a refi?
When people finally mail in the keys on their mortgage, I wonder if the credit card companies will cut them back or cut them off.
If so, that could add to the downturn. It seems that if a foreclosure shows up on your credit report, either your card debt could go to a higher rate or a lower line. No? Why would credit card companies want to carry more risk than they have to?
CR, do you know if the chart attempts to account for the fact that the loans will recast early if the borrowers make too many minimum payments and hit the LTV ceiling?
These charts just get uglier every time I see one. The huge pile of option adjustable rate and alt-a coming up for reset in '09 and '10 is something I don't quite remember from the last chart of this type.
I think the duration of the housing downturn is currently underestimated. Unless the USD LIBOR rate drops to the floor (not likely) there's going to be a lot of hurt showing up in those two years, and with falling home values, I don't see many people being able to refinance.
it is worth noting that for option mortgages, the fully-amortizing recasts will hit much earlier than the interest rate resets.
By my calculations (and borne out by some industry insiders), the recasts for 2005 and 2006 option mortgages will be in early 2008 (assuming they have been paying minimum throughout)
The option ARMs are the real time bomb. They are the secret of how the middle class in bubble markets bought median $600,000 homes.
I doubt people will try to refinance before reset since any other loan will likly have a much higher inital payment. And when it resets, there will be no way to refinance since the loan balance will exceed home value.
Bubble area markets will not even start to recover until those resets are through the system. 2012 or later.
I suspect many of the defaults will occur well before the rate reset. As people realize that they have zero equity (actually negative equity), they will have no incentive to hold onto the house, and will simply walk away as soon as they decide that they no longer want to make the payments. Many people can barely make the payments despite having an ultra-low teaser rate, and if they encounter any economic difficulties they may call it quits well before the real rate sets in.
Most of the pain could be worked out through 2008 and 2009, though there could still be some residual pain through 2010 and 2011.
The chart is a snapshot of a dynamic situation. It doesn't assume much in the way of foreclosure, and it also doesn't show that many of the these risky loans are continuing to be made....so it's probably going to be a broader and flatter picture.
I am curious about the timing of recognized losses of the option loans. Sure, they do not reset until 2009 thru 2011 but I have the feeling that A LOT of bad housing news is going to come to light before then. Can banks/servicers/whoever really convince investors these things are actually going to perform until 2009 when "whoops, who would have predicted this option arm disaster."
I think it will be crystal clear something will have to be done about that bulge before 2009-11.
How many of these option arms are still being made?
Unless I'm reading this chart wrong, it understates the level of resets compared to Ivy Zelman's report of 12 March 2007 (when she was still at CS). According to the latter peak at about $50 bln in December 2007, while this shows about $35 bln.
Also, didn't somebody update Zelman's figures to include non-securitised mortages? I thought CR has posted a graph (about 1 month ago?).
And to think this is still in it's infancy of how this mess is going to play out.
But seeing that there are a lot of foreclosures already on the books,maybe people are seeing their up and coming situation and mailing in the keys 2 years prior to their reset.Envelope & Stamp in one hand ...Plane tickets in the other.
With the massive Layoffs due to the Economy being in a recession, how does one figure these Option Arm folks are going to be able to afford that monthly Nut..Unless of course Wages take off...and we know that is not happening.
As far as the option ARMs go, isn't there also the issue of recasts before the resets?
I'm not totally up on this, but I do recall reading that if only minimum (neg am.) payments are being made the debt-to-value ratio can rise and trigger an early recast.
I realize this is pretty far into the process (an ubernerd post perhaps?), but does anyone have any idea how this might play out?
The thing about option ARMs is that there is more than one "reset."
Tanta did a post on this a while ago with the paperwork for option ARMs from a particular lender. As I remember it, there is usually an interest rate reset usually after 2-3 years, just like most regular ARMs.
But then there is the point where the borrower who has been using negative equity hits the loans debt threshold, usually 110% of the original loan. For someone paying the minimum amount each month, that might not happen for 4-5 years, which explains the jump in the chart. At that point, the loan becomes a regular amortizing ARM (these I believe is called a recast.) That's where the payment will really jump.
The chart seems to miss the rate restes that the option ARMs will experience sooner. Some are almost certainly already experiencing this. Downey, one of the kings of option ARMs, is already experiencing big jumps in nonperforming assets, like 20 basis points a month, they are already above 2%.
I think the people who can get out of these loans probably already have. Prepayments at lenders like Downey have fallen off dramatically. With falling prices in almost every market where these were big (CA, NV, AZ, etc) it would seem that door has probably closed for most of these people.
Thanks for the Option ARM schedule, but I'm not sure it accurately describes the current situation. A couple questions. The CLTV for 04, 05 and 06 look low to me. Where do your #s come from? Also, can you break out Cal, Fla, Nev, etc. where I think the Option ARM problem will be most severe?
And remember, that chart is just FIRST resets. All those numbers will be bumped up to a greater or lesser degree by secondary resets as well. Fun stuff!
The Option ARMs became popular at the end of 2004 and were booming by the middle of 2005. The payment rates on the Option ARMs are set for 5 years and then will recast to a fully amortized payment. The first big peak on the charts in 2010 reflects the loans that were originated in 2005 (the highest peak in 2011 was the 2006 originations).
However most loans will be recasting much sooner, if a loan balance reaches its negative amortization cap (ranges from 110% to 125% of the original balance), then the loan will recast into fully amortized payments.
Here is an example of a $500,000 loan taken out in January 2005 (first payment date of March 2005). If the loan had a 1% payment option, then the minimum payment the first year would have been $1608.20. The payments go up 7.5% a year ($1,728.81 in the second year, $1,858.47 in the third year). Assuming that a loan had a 3.5% margin over the 12 MTA index (currently at 4.863% +3.5% = 8.363% rate) and a 110% recast cap (this was a typical margin but could be lower or even higher), and if the borrower made them minimum payments every month, then the loan would recast during November 2007. The December 2007 payment would go from $1,858.47 to $4,194.36. The borrower now owes $550,000. These loans often had a 3 year prepayment penalty so the borrower cant really refinance until a few months after the loan recasts. Now with the deteriorating market prices and the tightened credit market, the borrower might not have many refinance options.
Up to 80% of all option ARM borrowers make only the minimum payment each month, according to Fitch Ratings ( Nightmare Mortgages ). A majority of the 2010 and 2011 recasts in the Credit Suisse charts will be recasting sooner.
The thing to remember about OAs is that rate resets really don't matter.
They are designed that way. The whole idea of a minimum payment is that the actual accrual rate can rise, but the borrower can continue to make the old payment. So they have no "payment shock" due simply to rate resets.
It is, indeed, the payment changes and recasts that are the issue, and that's what this chart is getting at.
It's very hard to say how fast an OA will reach its balance cap (remember that those have nothing to do with LTV; they are based on a percent of the original loan balance). Two things impact neg am speed: the borrower's payment habits and the spread between the teaser rate (that the minimum payment is based on) and subsequent adjustments. If the borrower regularly makes the minimum payment from the beginning, and the loan has a deep teaser/large margin, the rate of neg am can run 2.5% to 4.5% a year. That means that it takes more than two years for even a really cruddy OA (deep teaser, frequent rate adjustments, nasty margin) to hit a 110% cap, and a lot of those really cruddy ones have 115% or even 125% balance caps.
Also, all these charts we see are going to be different, depending on 1) the date of the dataset and 2) whether prepayment assumptions are built in or not.
With OAs, almost all of them had prepayment penalties of two years or more (up to five, I believe).
So what this chart shows is recast, not first rate adjustment (which is what it shows for non-OAs). Nearly all of these loans have a first recast date at the earlier of 1) the balance cap or 2) 60 months.
I have some info about outstandings somewhere . . . let me go see if I can find it.
Is there any info available on what prime borrowers in option ARMs are actually doing? How many of them are making the minimum payment, and how many of them are paying interest plus instead of interest minus?
The CLTV for 04, 05 and 06 look low to me. Where do your #s come from?
RThomas, I'm not sure of bacon dreamz's source, but every set of numbers I've seen on OA is very similar. They were, in fact, rarely a high-LTV or CLTV product.
They were also not particularly a purchase-money product. According to UBS, the purchase levels were:
The majority of OAs were originated as refinances, even in the peak years of 2005-2006. That's one reason you see such "healthy" CLTVs. The purchase-money loans were very often move-up borrowers who had just sold their previous homes into a hot market, and so had big down payments.
OT, for CR. Fed's Kroszner says some credit markets still broken.
I love how they never mention that the ratings firms they now say shouldn't have been used as a basis for buying these securities are the ratings firms that the regulators use to decide on the quality of investments.
RThomas, i got them from an ib research report...i don't have a breakdown by state, sorry. btw, those are just for securitized loans, as of the latest remittance reports.
Is there any info available on what prime borrowers in option ARMs are actually doing?
I have seen the claim that 40% of OA borrowers start negatively amortizing with the first payment, although I have forgotten the source of that. It was a while ago, and so the number could be higher with the last half of 06 and the first half of 07.
I have been keeping my eye on the reports of the big OA thrifts (DSL, FED, BKUNA), and they seem to be experiencing a neg am rate of 2.5-4.5% annually.
Bear in mind that OA was never a subprime product: the WA FICO for the 2006 vintage is 709. OA borrowers are prime borrowers: they're just over-stretched prime borrowers on their way to becoming subprime borrowers.
Kabuman - I don't know whether to thank you for the concise summary, or be angry over spoiling my lunch. I just can't imagine for the life of me being in a situation like that. Downright scary.
it is worth noting that for option mortgages, the fully-amortizing recasts will hit much earlier than the interest rate resets.
Noooooooo!!!111!!111
Dammit - The rate "resets" every damn month, starting at month 2 or 3. As others have stated, it is the RECAST that creates the payment shock on the POAs.
MattJ - POAs are ALL prime borrowers. I have the info you seek, but it's kind of for a limited audience (hey, I just work here). If you work for a large servicer, we might be able to work something out - hit me up shnaps.parlor@gmail.com
2008 is going to suck. Not to mention we get treated to the televised multimillion dollar quadrennial mudmatch we call presidential elections. ?????????????
Thanks for the info. I was expecting a greater effect from negative selection (i.e. stronger borrowers refinance and weaker borrowers pay the minimum payment).
The Federal Reserve will do whatever is necessary to prevent damage to the economy from the credit crunch that has gripped Wall Street, a Fed official said Monday, warning it will take time for financial markets to fully recover from the strains
That's interesting, considering the first payment is fully amortizing at 1.9% or whatever.
OK, second payment.
Thank heavens there's always someone around to catch me in an egregious misstatement of the facts.
Of course, when I was young we had to start making mortgage payments before the first payment date. And we had to send them to the servicer via Pony Express.
i'd like to see the combined income from the CEOS of the big banks and all these mortgage people for the past 5 years. I wonder how many billions that adds up to?
So the subprime will be cleared next year or so then the "correction" moves on to the "untapped equity is for fools" crowd in the better paper. It is starting to look more and more to me that real problem is that many, many people bought into the meme that building or leaving equity in your house was not maximizing your returns or your tax deduction. As late as last Spring, someone would pop up in a comment arguing that paying more than the minimal allowable principle was for suckers. Sadly, it appears many didn't park the saved principle payments in a high yield account that could be tapped to tide them over a market decline. Oops, there seems to be a flaw in the plan. Namely that what does up, can and will come down.
What about the fact that all those option arms will hit their debt ceilings and be recast to a higher payment where they cannot defer the interest payments any longer. That will add to the pain of 08-09 sub-prime arm sets!!
Technically, the third payment. Most get 60 days with their teaser. Ok, not an 'egregious' error - but we loyal readers hold you to a higher standard, my dear.
Sorry for being so dang precise. I'm just really frothed up after seeing this chart. It was like seeing a smaller, more poorly-labeled and non-dynamic version of something I spent a great deal of time building for what turned out to be a rather select group, thanks to my overlords. So anyway, I am fuming just a bit at the moment.
Shnapsterino, it's worse than you know. My 1:30 pm post above has the wrong set of numbers, because today is not my day to be able to 1) count on my fingers or 2) read columns and rows correctly. I just want to know how come, if I'm celebrating National Idiot Day, nobody sent me flowers. (Let me guess, they went to the wrong address . . .)
From the advice to Brandy re a possible recession:
If youre an investor, you may want to put at least some of your nest egg in a safer harbor. Stocks have had a terrific run lately, and while no one can predict where prices will go next, a recession often hurts stock prices. Bonds often do better in a recession because as business and consumers scale back on borrowing, that slowdown tends to bring long-term interest rates lower often with the help of the Fed. (When rates go down, bond prices go up.)
Yeah, Brandy, invest in a depreciating asset like the dollar. Kinda like investing in houses last year.
Tanta, if you took off the "steel toed bunny slippers of education" you could double your counting abilities. Those OA numbers are scary enough but given their geographic maldistribution the impact is going to be like today's weather. If you live in SoCal you are getting blown around and byrning embers are taking out a lot of your neighbors in a seemingly random fashion. Question; are those %ages numerical loan fractions or dollar weighted.?
Yeah ac, Brazil. I was there many years ago when inflation was like 150% a month, or some incredible figure, I don't completely recall. I had dollars so I was in fine shape. How the worm has turned, right?
Revolution is so overdue.
dotcommunist
i dont want to take your dreams away, but i lived under the communism and well. the system of liers you have now would only be replaced by system of complete idiocracy, see the movie for yourself. yes that kind of really really stupid people get to power in revolutions. you have no idea, no idea to paraphrase Cramer xD how stupid some people in power can be. the chimp is a genius compared to many so called communist i know who ruled during the best years of communism. capitalism favors wise and clever people, communism fear wise and clever people, and since the only ones left are the really stupid ones, these brainfree people get to power. just look at the myanmar, the "goverment" is building new capitol in the middle of the jungle and poor governemnt buirocrats they have their own myanmar version of lost, under the tents in the myanmar jungle xD just because the governemt consists of fools.
i am well aware of mistakes that appear in capitalism, but the mistakes that appear in communism are much much more scary. imagine the chimp not only giving out orders he get from his advisors, imagine the chimp giving out his own orders scary, and i lived under fools giving out the orders, that was too sad to be funny
one word, idiocracy
Yeah ac, Brazil. I was there many years ago when inflation was like 150% a month, or some incredible figure, I don't completely recall. I had dollars so I was in fine shape. How the worm has turned, right?
Really, Brazil has nothing to do with it. What ever that market may be it's clearly exhibiting a parabolic melt-up behavior which means it's almost certainly a leveraged bubble play.
That's not the kind of thing we should be tolerating at this point, much less herding new investors into with even more leverage.
i red somewhere that also M3 of eurozone is increasing cca 11% annualy so at the growth 4% and inflation 2% there is still 5% thats missing. but i also had a conversation with someone claiming that these GDP growth+inflation!=M3 based on something so i dont know either
From the advice to Brandy re a possible recession:
If youre an investor, you may want to put at least some of your nest egg in a safer harbor. Stocks have had a terrific run lately, and while no one can predict where prices will go next, a recession often hurts stock prices. Bonds often do better in a recession because as business and consumers scale back on borrowing, that slowdown tends to bring long-term interest rates lower often with the help of the Fed. (When rates go down, bond prices go up.)
Yeah, Brandy, invest in a depreciating asset like the dollar. Kinda like investing in houses last year.
My general advice in this situation would be not to try to make money - invest in highest grade bonds and diversify across currencies of stable economies.
I think commodities all around are getting slammed with leverage, so I would have a hard time recommending precious metals.
If you have to ask "what to do" you certainly shouldn't be trying to short anything.
Given the analysis above, it is clear that severe US and liquidity and credit crunch will get worse rather than better and it will lead to a generalized credit crunch that will trigger together with a worsening housing recession and a US consumer that is now on the ropes a severe economic recession in the US in 2008. Expect credit market conditions to tighten sharply over the next few months: the collapse of subprime lending has now led to a severe credit crunch in near prime and prime lending; the increase in credit cards and auto loans delinquencies will then spread the credit crunch to consumer debt; commercial real estate that had excesses similar to housing will be hit next; corporate default rates will start rising as higher junk bond yields and a weakening economy will take a toll on corporate earnings and balance sheets; the current deleveraging of the financial system and the reintermediation into the banking system of off-balances sheet SIV and of mortgages, MBS and leveraged loans will exacerbate the credit crunch in the banking system as banks capital is limited and banks liquidity also in short supply as banks are hoarding all the central banks liquidity injection; the subprime mortgage market is now dead; the CDO issuance market is effectively dead; the CLO and LBO markets are near frozen; the SIVs are unraveling and will be completely collapse and be unwound in a disorderly fashion that will lead to a disorderly sale of illiquid and impaired asset as the Super-conduit shell game will flow; and the liquidity crunch will persist in money markets and interbank markets as everyone is worried about counterparty risk and may need liquidity as the crunch will get worse. In due time even equity markets will realize that the Fed and central bank cannot resolve severe credit problems via liquidity injections: the event of last week prove that a slew of lousy economic news (a worsening housing recession, serious renewed credit problems, fall-off in corporate earnings) will take their toll on equity markets. The conditions described above are thus the factors that will trigger a generalized credit crunch and severe financial and real distress in the US and across the globe.
ac: Well the Brazilian economy has improved immensely due to Chinese demand for its raw materials, etc. And the result has been to strengthen the currency. I will check to see how that has fared vs. the dollar. Why would Brazil be a bubble? Any more than, say, Canada where the currency has appreciated vs. the dollar?
Q. How do you prepare for a recession?
A. Get out of debt and have 1 year cash on hand to prepare for possible loss of job.
I have my doubts we will even have a 2008 election. I see things so bad the stand-up comedians, err politicians will go underground to their safehouse. Americans, destitute and bankrupt, will demand change. Take J6P out of his confort zone and you gonna get hurt.
ac, i am also in capital preservation mode, ive been always so my "investments" are as following:
1. my RE portfolio consists from 1 bedroom appartment that i inherited and where i am living, since i am a lot of time on bussiness trips i rented it to some people, it ended in fiasco, so count me out from any future RE investments. besides i am going to inherit much more RE, so the utility bills will kill me in future at least the RE tax here is cca 0,1%
2. my cash is money in my local currency in which i get my paycheck and pay my bills and most of which is in yearly bank deposits insured by deposit insurance. also i have euros that i get from my bussiness trips as diets. anyway i will need to save a lot to pay for the difference between 1 and 3 bedroom appartment. hope the future fall in prices will lower the amount i have to pay.
3. money market fonds, bonds and stocks portfolio:
my retirement accounts are heavilly invested in them and not much i can do about them so i pass on any other "financial investments"
generally i like having cash, thats with what i pay my bills. here in europe only very old people still have usd, generally from their us relatives which they got from many years ago. most young people are having euros or libra since many young people from eastern europe work in uk or ireland
"I suspect many of the defaults will occur well before the rate reset"
Nope, you'll see the opposite.
People aren't that pro-active. They'll play out credit-cards, borrow from friends and family and in general delay the inevitable for perhaps a year past the peak of the resets.
I think I know very well what exactly is out there. On paper, anyway.
I'll be out in CA next month, staying in an area some would call an "F-minus". I'm really thinking about catching an open house or two. Have you heard of "poorism"? - I think I have a similar compulsion when it comes to getting a front-row seat to see how bubbles pop in the real world.
O/T - did you guys know that "Calabasas" is Spanish for "Pumpkin"? I learned that this weekend - That was all the inpsiration I needed for my great work of front-porch art. I am calling him "Espantapájarito".
I believe that the Great Economic Philosopher Carl Speckler said it best when he stated: " I'd keep playing. I don't think the heavy stuff will come down for a while."
Golfer (Broker): Nice shot, Bishop. You must have made a deal with the devil!
Bishop(homeowner): You know, theoretically, I could break the Club record.
Golfer(CR): You better come in until this blows over.
Bishop (homeowner): So what do you think?
Carl(Paulsen or Yun): I'd keep playing. I don't think the heavy stuff will come down for a while.
Bishop( Homeowner): You're right. Anyway, the good Lord would never disrupt the best game of my life.
[Bishop continues to golf in the rain, hitting amazing shot after amazing shot, with Carl admiring him the entire time. On the last hole, he misses a long putt.]
Bishop(Homeowner): OH RAT FARTS!!!!!
[Bishop is struck by lightning.]
I never thought i'd live to see the day that i agreed with that slimy, partisan, enron economist Krugman but for once WRT SIV's I agree with him. So it must be a bad deal..
2008 is going to suck. Not to mention we get treated to the televised multimillion dollar quadrennial mudmatch we call presidential elections. ?????????????
It only gets worse, Iowa is holding the 2012 primary caucuses November 7, 2008. Florida is apparently going for a primary on November 5.
" OA's shouldn't be allowed. At some point the government needs to protect people from their own stupidity, if only to protect the market as a whole."
I don't think you have to call it protecting people from their own stupidity: it's not letting people write checks their asses can't cash. Once you start letting people do that en masse, you get serious market-threatening solvency and liquidity problems like...right now.
It seems that things might just be as bad in the UK.
Good read.
"From 2001 to 2006, a total of £256bn in equity was extracted from UK property values in this way. Dependent as it is on rising house prices, housing equity withdrawl cannot continue to prop up our consumer spending at its current level," said the report.
The dramatic change in attitudes to debt has caused the UK savings rate to plummet from 8.3pc of disposable income fifteen years ago to around zero. Personal debt has risen by 137pc since June 1993 to £1,343bn, greater that annual GDP for the first time.
Sorry about your bad tenant situation. Don't know the laws in Europe but in the US a background check and a good lawyer is critical. Also, once your tenant starts being evasive, start the eviction process immediately. The fear of being put out on the streets with an eviction mark and a ruined credit report generally gives most credible people a whole different outlook on life.
Just want to thank everybody who explained the reset/recast difference (i had quite forgotten about Tanta's ubernerd post on the subject of negative amortisation).
I can't resist: was amused by the consecutive posts by Tanta and CR at 1:15 pm and 1:21 pm.
thanks Quincy k, its not that bad. i rented out to my cousin who was a perfect tenant but later jumped on "take mortgage or be priced out forever train" and who sent this other cousin of hers to me as new tenant
i was renting out just for the utility bill but these new tenants didnot repeat the calls and were really strange people (opened my mail) so i ended it. now we have some new crazy buirocrat paperwork starting regarding renting property so i am ending it because i dont want to run from one governemnt office to another, not for the price of the utility bill. the money for the utility bills wont kill me so i will just eat it. anyway 1 bedroom appartment has total utility bill just over 100usd a month so its ok
As you know, in a truly historic event yesterday, Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart announced that FHFA has placed Fannie Mae and Freddie Mac into conservatorship. The government (FHFA) will now be managing Fannie Mae and Freddie Mac for the foreseeable future.
Yeah - so over a year later, we all see what kind of mess we are still in.
For those looking for mortgage resources in order to gain a better understanding of either mortgages, or all of the mess, check out BeatMyBroker.com You can find the best mortgage rates and lowest fees...plus TONS of information.
And to think all of this chaos and we are only a few months in to a multi-year double "wave" of rate resets that will not play out until 2011.
This is gonna be long, slow, and painful.
Got Gold?
Nice chart.
Do I have it right that if rates rise for the next couple years it would mean that make that 2nd bulge in 10/11 both resets much more painfully and that far fewer people would be able to do a refi?
When people finally mail in the keys on their mortgage, I wonder if the credit card companies will cut them back or cut them off.
If so, that could add to the downturn. It seems that if a foreclosure shows up on your credit report, either your card debt could go to a higher rate or a lower line. No? Why would credit card companies want to carry more risk than they have to?
CR, do you know if the chart attempts to account for the fact that the loans will recast early if the borrowers make too many minimum payments and hit the LTV ceiling?
Rates will have to rise in the next few years. The dollar is already worth nothing. Lowering interest rates is only prolonging the pain.
IS there a version fo this same chart that goes back in time a few years?
To compare lets say '07or '12, with 02?
These charts just get uglier every time I see one. The huge pile of option adjustable rate and alt-a coming up for reset in '09 and '10 is something I don't quite remember from the last chart of this type.
I think the duration of the housing downturn is currently underestimated. Unless the USD LIBOR rate drops to the floor (not likely) there's going to be a lot of hurt showing up in those two years, and with falling home values, I don't see many people being able to refinance.
I don't know why I find this is funny:
What do you need to do to get through a recession? I am 33 years old. I have never had this oncoming experience as an adult, taxpaying citizen.
Brandy, Weston, Fla.
How you can prepare for a recession
Brandy, get some practice with a firearm and start digging a big hole in the backyard.
CR,
it is worth noting that for option mortgages, the fully-amortizing recasts will hit much earlier than the interest rate resets.
By my calculations (and borne out by some industry insiders), the recasts for 2005 and 2006 option mortgages will be in early 2008 (assuming they have been paying minimum throughout)
The option ARMs are the real time bomb. They are the secret of how the middle class in bubble markets bought median $600,000 homes.
I doubt people will try to refinance before reset since any other loan will likly have a much higher inital payment. And when it resets, there will be no way to refinance since the loan balance will exceed home value.
Bubble area markets will not even start to recover until those resets are through the system. 2012 or later.
OAs by origination vintage:
Orig CLTV:
2004: 73
2005: 77
2006: 79
2007: 77
Curr CLTV:
2004: 76.2
2005: 81.9
2006: 82.9
2007: 78.9
Curr CLTV w/ HPA (OFHEO):
2004: 60.8
2005: 74.5
2006: 82.8
2007: 79.3
I suspect many of the defaults will occur well before the rate reset. As people realize that they have zero equity (actually negative equity), they will have no incentive to hold onto the house, and will simply walk away as soon as they decide that they no longer want to make the payments. Many people can barely make the payments despite having an ultra-low teaser rate, and if they encounter any economic difficulties they may call it quits well before the real rate sets in.
Most of the pain could be worked out through 2008 and 2009, though there could still be some residual pain through 2010 and 2011.
The chart is a snapshot of a dynamic situation. It doesn't assume much in the way of foreclosure, and it also doesn't show that many of the these risky loans are continuing to be made....so it's probably going to be a broader and flatter picture.
Nothing like pealing a bandaid off for 5+ years.
I am curious about the timing of recognized losses of the option loans. Sure, they do not reset until 2009 thru 2011 but I have the feeling that A LOT of bad housing news is going to come to light before then. Can banks/servicers/whoever really convince investors these things are actually going to perform until 2009 when "whoops, who would have predicted this option arm disaster."
I think it will be crystal clear something will have to be done about that bulge before 2009-11.
How many of these option arms are still being made?
Unless I'm reading this chart wrong, it understates the level of resets compared to Ivy Zelman's report of 12 March 2007 (when she was still at CS). According to the latter peak at about $50 bln in December 2007, while this shows about $35 bln.
Also, didn't somebody update Zelman's figures to include non-securitised mortages? I thought CR has posted a graph (about 1 month ago?).
And to think this is still in it's infancy of how this mess is going to play out.
But seeing that there are a lot of foreclosures already on the books,maybe people are seeing their up and coming situation and mailing in the keys 2 years prior to their reset.Envelope & Stamp in one hand ...Plane tickets in the other.
With the massive Layoffs due to the Economy being in a recession, how does one figure these Option Arm folks are going to be able to afford that monthly Nut..Unless of course Wages take off...and we know that is not happening.
The speculative feeding frenzy continues. I'm going to see if I can get these in our 401k plans:
New Latin American funds allow investors to double down
Nothing like doubling down long on markets that are already up 1500% in the past 5 years to really rake in the bucks:
Brazil
As far as the option ARMs go, isn't there also the issue of recasts before the resets?
I'm not totally up on this, but I do recall reading that if only minimum (neg am.) payments are being made the debt-to-value ratio can rise and trigger an early recast.
I realize this is pretty far into the process (an ubernerd post perhaps?), but does anyone have any idea how this might play out?
Lindsey, Tanta did an UberNerd on OAs...click the UberNerd thingy up top and you'll see it.
The thing about option ARMs is that there is more than one "reset."
Tanta did a post on this a while ago with the paperwork for option ARMs from a particular lender. As I remember it, there is usually an interest rate reset usually after 2-3 years, just like most regular ARMs.
But then there is the point where the borrower who has been using negative equity hits the loans debt threshold, usually 110% of the original loan. For someone paying the minimum amount each month, that might not happen for 4-5 years, which explains the jump in the chart. At that point, the loan becomes a regular amortizing ARM (these I believe is called a recast.) That's where the payment will really jump.
The chart seems to miss the rate restes that the option ARMs will experience sooner. Some are almost certainly already experiencing this. Downey, one of the kings of option ARMs, is already experiencing big jumps in nonperforming assets, like 20 basis points a month, they are already above 2%.
I think the people who can get out of these loans probably already have. Prepayments at lenders like Downey have fallen off dramatically. With falling prices in almost every market where these were big (CA, NV, AZ, etc) it would seem that door has probably closed for most of these people.
"many homeowners will be upside down when the ARM resets."
Uh, many homeowners are upside down right now!
Based on this graph, would it not reasonable to assume falling house prices at least into 2012?
Bacon dreamz,
Thanks for the Option ARM schedule, but I'm not sure it accurately describes the current situation. A couple questions. The CLTV for 04, 05 and 06 look low to me. Where do your #s come from? Also, can you break out Cal, Fla, Nev, etc. where I think the Option ARM problem will be most severe?
to go along with my earlier numbers...
avg negam %:
2004: 103.5
2005: 104.7
2006: 103.5
And remember, that chart is just FIRST resets. All those numbers will be bumped up to a greater or lesser degree by secondary resets as well. Fun stuff!
The Option ARMs became popular at the end of 2004 and were booming by the middle of 2005. The payment rates on the Option ARMs are set for 5 years and then will recast to a fully amortized payment. The first big peak on the charts in 2010 reflects the loans that were originated in 2005 (the highest peak in 2011 was the 2006 originations).
). A majority of the 2010 and 2011 recasts in the Credit Suisse charts will be recasting sooner.
However most loans will be recasting much sooner, if a loan balance reaches its negative amortization cap (ranges from 110% to 125% of the original balance), then the loan will recast into fully amortized payments.
Here is an example of a $500,000 loan taken out in January 2005 (first payment date of March 2005). If the loan had a 1% payment option, then the minimum payment the first year would have been $1608.20. The payments go up 7.5% a year ($1,728.81 in the second year, $1,858.47 in the third year). Assuming that a loan had a 3.5% margin over the 12 MTA index (currently at 4.863% +3.5% = 8.363% rate) and a 110% recast cap (this was a typical margin but could be lower or even higher), and if the borrower made them minimum payments every month, then the loan would recast during November 2007. The December 2007 payment would go from $1,858.47 to $4,194.36. The borrower now owes $550,000. These loans often had a 3 year prepayment penalty so the borrower cant really refinance until a few months after the loan recasts. Now with the deteriorating market prices and the tightened credit market, the borrower might not have many refinance options.
Up to 80% of all option ARM borrowers make only the minimum payment each month, according to Fitch Ratings ( Nightmare Mortgages
The thing to remember about OAs is that rate resets really don't matter.
They are designed that way. The whole idea of a minimum payment is that the actual accrual rate can rise, but the borrower can continue to make the old payment. So they have no "payment shock" due simply to rate resets.
It is, indeed, the payment changes and recasts that are the issue, and that's what this chart is getting at.
It's very hard to say how fast an OA will reach its balance cap (remember that those have nothing to do with LTV; they are based on a percent of the original loan balance). Two things impact neg am speed: the borrower's payment habits and the spread between the teaser rate (that the minimum payment is based on) and subsequent adjustments. If the borrower regularly makes the minimum payment from the beginning, and the loan has a deep teaser/large margin, the rate of neg am can run 2.5% to 4.5% a year. That means that it takes more than two years for even a really cruddy OA (deep teaser, frequent rate adjustments, nasty margin) to hit a 110% cap, and a lot of those really cruddy ones have 115% or even 125% balance caps.
Also, all these charts we see are going to be different, depending on 1) the date of the dataset and 2) whether prepayment assumptions are built in or not.
With OAs, almost all of them had prepayment penalties of two years or more (up to five, I believe).
So what this chart shows is recast, not first rate adjustment (which is what it shows for non-OAs). Nearly all of these loans have a first recast date at the earlier of 1) the balance cap or 2) 60 months.
I have some info about outstandings somewhere . . . let me go see if I can find it.
this chart is just first resets. Here is Tanta's discusson: Ready, Set, Reset
Best to all
Is there any info available on what prime borrowers in option ARMs are actually doing? How many of them are making the minimum payment, and how many of them are paying interest plus instead of interest minus?
The CLTV for 04, 05 and 06 look low to me. Where do your #s come from?
RThomas, I'm not sure of bacon dreamz's source, but every set of numbers I've seen on OA is very similar. They were, in fact, rarely a high-LTV or CLTV product.
They were also not particularly a purchase-money product. According to UBS, the purchase levels were:
2001: 34%
2002: 33%
2003: 35%
2004: 40%
2005: 46%
2006: 46%
2007 (1H): 21%
The majority of OAs were originated as refinances, even in the peak years of 2005-2006. That's one reason you see such "healthy" CLTVs. The purchase-money loans were very often move-up borrowers who had just sold their previous homes into a hot market, and so had big down payments.
Mortgage Reset Chart + Oil Reset Chart + turbulent times ahead
Steep decline in oil production brings risk of war and unrest, says new study
Steep decline in oil production brings risk of war and unrest, says new study |
Business |
The Guardian
Nice chart here
Fannie Mae
OT, for CR. Fed's Kroszner says some credit markets still broken.
I love how they never mention that the ratings firms they now say shouldn't have been used as a basis for buying these securities are the ratings firms that the regulators use to decide on the quality of investments.
RThomas, i got them from an ib research report...i don't have a breakdown by state, sorry. btw, those are just for securitized loans, as of the latest remittance reports.
Is there any info available on what prime borrowers in option ARMs are actually doing?
I have seen the claim that 40% of OA borrowers start negatively amortizing with the first payment, although I have forgotten the source of that. It was a while ago, and so the number could be higher with the last half of 06 and the first half of 07.
I have been keeping my eye on the reports of the big OA thrifts (DSL, FED, BKUNA), and they seem to be experiencing a neg am rate of 2.5-4.5% annually.
Bear in mind that OA was never a subprime product: the WA FICO for the 2006 vintage is 709. OA borrowers are prime borrowers: they're just over-stretched prime borrowers on their way to becoming subprime borrowers.
Kabuman - I don't know whether to thank you for the concise summary, or be angry over spoiling my lunch. I just can't imagine for the life of me being in a situation like that. Downright scary.
dd
it is worth noting that for option mortgages, the fully-amortizing recasts will hit much earlier than the interest rate resets.
Noooooooo!!!111!!111
Dammit - The rate "resets" every damn month, starting at month 2 or 3. As others have stated, it is the RECAST that creates the payment shock on the POAs.
MattJ - POAs are ALL prime borrowers. I have the info you seek, but it's kind of for a limited audience (hey, I just work here). If you work for a large servicer, we might be able to work something out - hit me up shnaps.parlor@gmail.com
2008 is going to suck. Not to mention we get treated to the televised multimillion dollar quadrennial mudmatch we call presidential elections. ?????????????
?????? = ja... nihon-ni kaerou-ka.
I have seen the claim that 40% of OA borrowers start negatively amortizing with the first payment,
That's interesting, considering the first payment is fully amortizing at 1.9% or whatever.
Tanta & Bacon dreamz,
Thanks for the info. I was expecting a greater effect from negative selection (i.e. stronger borrowers refinance and weaker borrowers pay the minimum payment).
The Federal Reserve will do whatever is necessary to prevent damage to the economy from the credit crunch that has gripped Wall Street, a Fed official said Monday, warning it will take time for financial markets to fully recover from the strains
oh boy, i can't wait...
That's interesting, considering the first payment is fully amortizing at 1.9% or whatever.
OK, second payment.
Thank heavens there's always someone around to catch me in an egregious misstatement of the facts.
Of course, when I was young we had to start making mortgage payments before the first payment date. And we had to send them to the servicer via Pony Express.
i'd like to see the combined income from the CEOS of the big banks and all these mortgage people for the past 5 years. I wonder how many billions that adds up to?
The Fed should take that money for the bailout.
Does anyone think the Fed is going to care about inflation anymore? Maybe they can hid the inflation figures just like they did M3.
So the subprime will be cleared next year or so then the "correction" moves on to the "untapped equity is for fools" crowd in the better paper. It is starting to look more and more to me that real problem is that many, many people bought into the meme that building or leaving equity in your house was not maximizing your returns or your tax deduction. As late as last Spring, someone would pop up in a comment arguing that paying more than the minimal allowable principle was for suckers. Sadly, it appears many didn't park the saved principle payments in a high yield account that could be tapped to tide them over a market decline. Oops, there seems to be a flaw in the plan. Namely that what does up, can and will come down.
MOT, anything that'll keep the stock market nominally propped up.
Most people hate the math of reality. And the gubment inflation numbers already hide the real inflation.
Therefore, inflate, print, prop the stock market, hide inflation. Oh, yeah, one more thing:
LIE, LIE, LIE, LIE, LIE, LIE (AND STEAL) AND LIE, LIE, LIE...
Revolution is so overdue.
What about the fact that all those option arms will hit their debt ceilings and be recast to a higher payment where they cannot defer the interest payments any longer. That will add to the pain of 08-09 sub-prime arm sets!!
Technically, the third payment. Most get 60 days with their teaser. Ok, not an 'egregious' error - but we loyal readers hold you to a higher standard, my dear.
Sorry for being so dang precise. I'm just really frothed up after seeing this chart. It was like seeing a smaller, more poorly-labeled and non-dynamic version of something I spent a great deal of time building for what turned out to be a rather select group, thanks to my overlords. So anyway, I am fuming just a bit at the moment.
Sadly, it appears many didn't park the saved principle payments in a high yield account
Maybe they did. Maybe they put them into a High Grade Enhanced Asset thingy from Bear Stearns.
Shnapsterino, it's worse than you know. My 1:30 pm post above has the wrong set of numbers, because today is not my day to be able to 1) count on my fingers or 2) read columns and rows correctly. I just want to know how come, if I'm celebrating National Idiot Day, nobody sent me flowers. (Let me guess, they went to the wrong address . . .)
Purchase mix for OAs (true version):
2001: 33%
2002: 37%
2003: 30%
2004: 38%
2005: 38%
2006: 28%
2007: 21%
If I screwed anything else up, let me know.
From the advice to Brandy re a possible recession:
If youre an investor, you may want to put at least some of your nest egg in a safer harbor. Stocks have had a terrific run lately, and while no one can predict where prices will go next, a recession often hurts stock prices. Bonds often do better in a recession because as business and consumers scale back on borrowing, that slowdown tends to bring long-term interest rates lower often with the help of the Fed. (When rates go down, bond prices go up.)
Yeah, Brandy, invest in a depreciating asset like the dollar. Kinda like investing in houses last year.
Tanta, if you took off the "steel toed bunny slippers of education" you could double your counting abilities.
Those OA numbers are scary enough but given their geographic maldistribution the impact is going to be like today's weather. If you live in SoCal you are getting blown around and byrning embers are taking out a lot of your neighbors in a seemingly random fashion. Question; are those %ages numerical loan fractions or dollar weighted.?
Yeah ac, Brazil. I was there many years ago when inflation was like 150% a month, or some incredible figure, I don't completely recall. I had dollars so I was in fine shape. How the worm has turned, right?
Fed's Gov. Kroszner: Some credit markets still broken
Some derivative markets remain broken: Fed's Kroszner - MarketWatch
Revolution is so overdue.
scary, and i lived under fools giving out the orders, that was too sad to be funny
dotcommunist
i dont want to take your dreams away, but i lived under the communism and well. the system of liers you have now would only be replaced by system of complete idiocracy, see the movie for yourself. yes that kind of really really stupid people get to power in revolutions. you have no idea, no idea to paraphrase Cramer xD how stupid some people in power can be. the chimp is a genius compared to many so called communist i know who ruled during the best years of communism. capitalism favors wise and clever people, communism fear wise and clever people, and since the only ones left are the really stupid ones, these brainfree people get to power. just look at the myanmar, the "goverment" is building new capitol in the middle of the jungle and poor governemnt buirocrats they have their own myanmar version of lost, under the tents in the myanmar jungle xD just because the governemt consists of fools.
i am well aware of mistakes that appear in capitalism, but the mistakes that appear in communism are much much more scary. imagine the chimp not only giving out orders he get from his advisors, imagine the chimp giving out his own orders
one word, idiocracy
Riffing off what Ministry of Truth said, can anyone correlate M3, whatever it is, to what I view as inflation...CPI plus food and energy?
If M3 is expanding at 12-14% as Shadowstats groupies seem to agree, does that imply an identical rate of inflation, minus the GNP rate of growth?
OA's shouldn't be allowed. At some point the government needs to protect people from their own stupidity, if only to protect the market as a whole.
Yeah ac, Brazil. I was there many years ago when inflation was like 150% a month, or some incredible figure, I don't completely recall. I had dollars so I was in fine shape. How the worm has turned, right?
Really, Brazil has nothing to do with it. What ever that market may be it's clearly exhibiting a parabolic melt-up behavior which means it's almost certainly a leveraged bubble play.
That's not the kind of thing we should be tolerating at this point, much less herding new investors into with even more leverage.
i red somewhere that also M3 of eurozone is increasing cca 11% annualy so at the growth 4% and inflation 2% there is still 5% thats missing. but i also had a conversation with someone claiming that these GDP growth+inflation!=M3 based on something so i dont know either
From the advice to Brandy re a possible recession:
If youre an investor, you may want to put at least some of your nest egg in a safer harbor. Stocks have had a terrific run lately, and while no one can predict where prices will go next, a recession often hurts stock prices. Bonds often do better in a recession because as business and consumers scale back on borrowing, that slowdown tends to bring long-term interest rates lower often with the help of the Fed. (When rates go down, bond prices go up.)
Yeah, Brandy, invest in a depreciating asset like the dollar. Kinda like investing in houses last year.
My general advice in this situation would be not to try to make money - invest in highest grade bonds and diversify across currencies of stable economies.
I think commodities all around are getting slammed with leverage, so I would have a hard time recommending precious metals.
If you have to ask "what to do" you certainly shouldn't be trying to short anything.
Calif. fires force 250,000 to evacuate
Nearly 250,000 people were forced to flee in San Diego County alone
CR: let us know you're ok when you have a chance.
Given the analysis above, it is clear that severe US and liquidity and credit crunch will get worse rather than better and it will lead to a generalized credit crunch that will trigger together with a worsening housing recession and a US consumer that is now on the ropes a severe economic recession in the US in 2008. Expect credit market conditions to tighten sharply over the next few months: the collapse of subprime lending has now led to a severe credit crunch in near prime and prime lending; the increase in credit cards and auto loans delinquencies will then spread the credit crunch to consumer debt; commercial real estate that had excesses similar to housing will be hit next; corporate default rates will start rising as higher junk bond yields and a weakening economy will take a toll on corporate earnings and balance sheets; the current deleveraging of the financial system and the reintermediation into the banking system of off-balances sheet SIV and of mortgages, MBS and leveraged loans will exacerbate the credit crunch in the banking system as banks capital is limited and banks liquidity also in short supply as banks are hoarding all the central banks liquidity injection; the subprime mortgage market is now dead; the CDO issuance market is effectively dead; the CLO and LBO markets are near frozen; the SIVs are unraveling and will be completely collapse and be unwound in a disorderly fashion that will lead to a disorderly sale of illiquid and impaired asset as the Super-conduit shell game will flow; and the liquidity crunch will persist in money markets and interbank markets as everyone is worried about counterparty risk and may need liquidity as the crunch will get worse. In due time even equity markets will realize that the Fed and central bank cannot resolve severe credit problems via liquidity injections: the event of last week prove that a slew of lousy economic news (a worsening housing recession, serious renewed credit problems, fall-off in corporate earnings) will take their toll on equity markets. The conditions described above are thus the factors that will trigger a generalized credit crunch and severe financial and real distress in the US and across the globe.
Roubini on the near future of the economy,
ac: Well the Brazilian economy has improved immensely due to Chinese demand for its raw materials, etc. And the result has been to strengthen the currency. I will check to see how that has fared vs. the dollar. Why would Brazil be a bubble? Any more than, say, Canada where the currency has appreciated vs. the dollar?
Q. How do you prepare for a recession?
A. Get out of debt and have 1 year cash on hand to prepare for possible loss of job.
I have my doubts we will even have a 2008 election. I see things so bad the stand-up comedians, err politicians will go underground to their safehouse. Americans, destitute and bankrupt, will demand change. Take J6P out of his confort zone and you gonna get hurt.
Brazilian Real vs the dollar, last five years.
Currency Converter - Yahoo! Finance
"they seem to be experiencing a neg am rate of 2.5-4.5% annually."
Does this mean neg am on that percentage of their loans or that much accumulation on their entire outstanding dollar amount?
ot to make light of the fires in SoCal, but if a quarter of a million people have to flee, and houses are at risk of bruning...
plus
all those now vacant REO and underwater "investors"....
ac, i am also in capital preservation mode, ive been always
so my "investments" are as following:
at least the RE tax here is cca 0,1%
so i pass on any other "financial investments"
1. my RE portfolio consists from 1 bedroom appartment that i inherited and where i am living, since i am a lot of time on bussiness trips i rented it to some people, it ended in fiasco, so count me out from any future RE investments. besides i am going to inherit much more RE, so the utility bills will kill me in future
2. my cash is money in my local currency in which i get my paycheck and pay my bills and most of which is in yearly bank deposits insured by deposit insurance. also i have euros that i get from my bussiness trips as diets. anyway i will need to save a lot to pay for the difference between 1 and 3 bedroom appartment. hope the future fall in prices will lower the amount i have to pay.
3. money market fonds, bonds and stocks portfolio:
my retirement accounts are heavilly invested in them and not much i can do about them
generally i like having cash, thats with what i pay my bills. here in europe only very old people still have usd, generally from their us relatives which they got from many years ago. most young people are having euros or libra since many young people from eastern europe work in uk or ireland
can someone recall a graph that showed the decrease in foreign investment last month?
"I suspect many of the defaults will occur well before the rate reset"
Nope, you'll see the opposite.
People aren't that pro-active. They'll play out credit-cards, borrow from friends and family and in general delay the inevitable for perhaps a year past the peak of the resets.
I think I know very well what exactly is out there. On paper, anyway.
I'll be out in CA next month, staying in an area some would call an "F-minus". I'm really thinking about catching an open house or two. Have you heard of "poorism"? - I think I have a similar compulsion when it comes to getting a front-row seat to see how bubbles pop in the real world.
O/T - did you guys know that "Calabasas" is Spanish for "Pumpkin"? I learned that this weekend - That was all the inpsiration I needed for my great work of front-porch art. I am calling him "Espantapájarito".
Is the SoCal fires a way to get rid of inventory? Where is my tinfoil hat?
I believe that the Great Economic Philosopher Carl Speckler said it best when he stated: " I'd keep playing. I don't think the heavy stuff will come down for a while."
Golfer (Broker): Nice shot, Bishop. You must have made a deal with the devil!
Bishop(homeowner): You know, theoretically, I could break the Club record.
Golfer(CR): You better come in until this blows over.
Bishop (homeowner): So what do you think?
Carl(Paulsen or Yun): I'd keep playing. I don't think the heavy stuff will come down for a while.
Bishop( Homeowner): You're right. Anyway, the good Lord would never disrupt the best game of my life.
[Bishop continues to golf in the rain, hitting amazing shot after amazing shot, with Carl admiring him the entire time. On the last hole, he misses a long putt.]
Bishop(Homeowner): OH RAT FARTS!!!!!
[Bishop is struck by lightning.]
I never thought i'd live to see the day that i agreed with that slimy, partisan, enron economist Krugman but for once WRT SIV's I agree with him. So it must be a bad deal..
Cordially,
Hank Reardo
2008 is going to suck. Not to mention we get treated to the televised multimillion dollar quadrennial mudmatch we call presidential elections. ?????????????
It only gets worse, Iowa is holding the 2012 primary caucuses November 7, 2008. Florida is apparently going for a primary on November 5.
" OA's shouldn't be allowed. At some point the government needs to protect people from their own stupidity, if only to protect the market as a whole."
I don't think you have to call it protecting people from their own stupidity: it's not letting people write checks their asses can't cash. Once you start letting people do that en masse, you get serious market-threatening solvency and liquidity problems like...right now.
Sorry I am new here sent by the folks at Mortgage Grapevine...
I am trying to find who can do a 100% LTV, OO, SISA, FICO 570, in the DC MSA...for $550K
a friend is helping me with a high appraisal so that these guys can get money back to fix up the place a bit also they want a new car.....
Can anyone help me with this?
My old broker friend used to do 30 of these a day now he lives in New Zealand and i dont have any idea what i am doing....
Claude Slagenhop
Claude -
That's a slam-dunk.
It seems that things might just be as bad in the UK.
Good read.
"From 2001 to 2006, a total of £256bn in equity was extracted from UK property values in this way. Dependent as it is on rising house prices, housing equity withdrawl cannot continue to prop up our consumer spending at its current level," said the report.
The dramatic change in attitudes to debt has caused the UK savings rate to plummet from 8.3pc of disposable income fifteen years ago to around zero. Personal debt has risen by 137pc since June 1993 to £1,343bn, greater that annual GDP for the first time.
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=FUJLGSKISPCSFQFIQMGCFF4AVCBQUIV0?xml=/money/2007/10/22/bcnuksham122.xml
I am not sure if it was posted already but here is very good comments by Peter Schiff about morgages and real estate
YouTube - 10/16/2007-Part 3 Ron Paul Supporter Peter Schiff On FOX
I especially liked the last 15 seconds.
revro-
Sorry about your bad tenant situation. Don't know the laws in Europe but in the US a background check and a good lawyer is critical. Also, once your tenant starts being evasive, start the eviction process immediately. The fear of being put out on the streets with an eviction mark and a ruined credit report generally gives most credible people a whole different outlook on life.
If someone in an option ARM has their house fall in value say 20% will this kick the option ARM early???
joe: no.
Just want to thank everybody who explained the reset/recast difference (i had quite forgotten about Tanta's ubernerd post on the subject of negative amortisation).
I can't resist: was amused by the consecutive posts by Tanta and CR at 1:15 pm and 1:21 pm.
thanks Quincy k, its not that bad. i rented out to my cousin who was a perfect tenant but later jumped on "take mortgage or be priced out forever train" and who sent this other cousin of hers to me as new tenant
i was renting out just for the utility bill but these new tenants didnot repeat the calls and were really strange people (opened my mail) so i ended it. now we have some new crazy buirocrat paperwork starting regarding renting property so i am ending it because i dont want to run from one governemnt office to another, not for the price of the utility bill. the money for the utility bills wont kill me so i will just eat it. anyway 1 bedroom appartment has total utility bill just over 100usd a month so its ok
Colorado Springs Real Estate Resources
Colorado Springs Realtors
Colorado Springs, CO Real Estate
As you know, in a truly historic event yesterday, Treasury Secretary Paulson and Federal Housing Finance Agency Director Lockhart announced that FHFA has placed Fannie Mae and Freddie Mac into conservatorship. The government (FHFA) will now be managing Fannie Mae and Freddie Mac for the foreseeable future.
Mortgage Directory of Lenders
mortgage lenders
Yeah - so over a year later, we all see what kind of mess we are still in.
For those looking for mortgage resources in order to gain a better understanding of either mortgages, or all of the mess, check out BeatMyBroker.com You can find the best mortgage rates and lowest fees...plus TONS of information.
Where can one find an updated chart???