The Treasury Department agency recently boosted the minimum capital requirements for the parent, Downey Financial Corp., as the company struggled with the slumping mortgage market. Downey was hit hard by rising mortgage defaults, especially in its option adjustable-rate mortgage holdings. Option ARMs allow customers to choose a different payment option each month — including a payment that is smaller than the interest due on the loan.
Option ARMs have been among the worst-performing loans during the downturn in the real estate market.
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Must say, a very smooth transition for most failing large banks thus far. No impact to the depositors. But, impact to our tax dollars….. ouch!
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