Option ARM timebomb set to explode....

wolfplayer

That 73 year old. Calling for a bail-out for people like herself, "like the banks and car industry received."

What's crazy is the talk about a 73 year old lady, Shirley Breitmaier, who's mortgage payment is skyrocketing from $98/month (which I'm sure was the minimum allowable payment) to $3,500. That's in paragraph one. About half way into the story we find out her mortgage was a $313,000 loan.

So, $98 was insanely low and she was/is clearly neg am'ing massively ($98/month actually equates to 3/8s of 1% annually!). Her loan is particularly lax as it allows her to neg am to 145% (so nearly $450,000) of the original loan balance though most Option ARMs cap that amount at 115-120% of the initial balance. Also, her loan was a re-fi as she's lived in the house for decades, which makes it a sad human story (hopefully she had fun with all the money).

People often get very angry at the lender in these cases, but forget that the borrower in a re-fi got a huge amount of cash and chose to do something with that money. I have sympathy, but it's limited by this fact.

http://investmentlinebacker.blogspot.com/2009/06/option-arm-reset-wave-threatens-housing.html

mbga9pgf

wolfplayer wrote: »

That 73 year old. Calling for a bail-out for people like herself, "like the banks and car industry received."



http://investmentlinebacker.blogspot.com/2009/06/option-arm-reset-wave-threatens-housing.html

I bet she is laughing herself to her rapidly approaching grave. 450K debt, 73 years old...

I hope she enjoyed spending her countries future the greedy b*tch.

StevieJ

mbga9pgf wrote: »

http://online.wsj.com/article/BT-CO-20090710-713165.html



No recovery in sight I am afraid.

So anything from those charlatans that assured us prime mortgages wouldn't go pop?

I assume the JPM share price must be collapsing under the weight of such obvious potential (and actual) capital destruction

http://uk.finance.yahoo.com/q/bc?s=JPM&t=6m&l=on&z=m&q=l&c=^DJI

Or maybe not

BTW those Charlatans are a good band, didn't realise they had opinions on the US housing market though :rolleyes:

Conrad

The Treasury will nationalise more institutions if needbe, to get these toxics isolated from the economy.

mbga9pgf

Debt still needs to be paid though. Either they need to take around a further 250-500 bill in writedowns (will the bond markets take it?) or will the unfortunate homeowners be expected to stump the bill.

Long and short is, the supposed recovery is far from sight and those green shoots that were talked about correspond strongly with the dip in ARM resets.

more money going on bailout = less money available for economic stimulation I am afraid.

sabretoothtigger

(hopefully she had fun with all the money).

She just thought she was richer then she actually was. So on the flip side it should work out that she leaves no wealth to her children and lives on 83 dollars a month for the rest of her years, thats the abrupt seesaw of market dynamics

What actually happen will probably be more favourable to her as she can dump the debt and keep any savings, somebody will have to pay the bill though

mbga9pgf

Its all going Tango Uniform....

7-19 Mortgage Default Crisis – Brutal Past Two-Months



http://www.fieldcheckgroup.com/2009/07/19/7-19-mortgage-default-crisis-brutal-past-two-months/

Mr mortgage back again.



One in 5 properties in Fl and NV are now in default....

matbe

Thats America, is it relevant to UK ?

One trick pony.

StevieJ

matbe wrote: »

Thats America, is it relevant to UK ?

One trick pony.

It is relevant to the UK because the UK banks hold instruments that contain US mortgage debt, so the more defaults the more they have to write off resulting in a reduction in capital, having said that I am sure that these default levels have been more than anticipated and provided for previously.

mbga9pgf

... Or spread out over the longest period possible in the hopes that the impending waves of bad debt dont take down the financial system.

My point being, any recovery is a long way off yet.