Here is a recent link of where I found a good graph representatoins of subprime mortgage reset timeline.

http://bp1.blogger.com/_nSTO-vZpSgc/Rme8yHvw2iI/AAAAAAAAAz0/911CnD77NNU/s1600-h/mortgage-resets.png

Source: Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Base on that graph alone, I would have to the the largest drops will be between now and spring of 2009. What do you guys think?

Based on that graph it should go up by I think it will be multiplied. Last year’s resets were less than half or next years and we’ve seen the effect that had. The upcoming resets will have an ever harder time. There are twice as many of them, resales prices are lower, time on market is longer, the availability of the exotic loans is diminishing and more of them were buyers at the peak so more will be upside down. The forclosures and distress sales that hit the market in the last year had more cusion than those in the upcoming 12 months. Today’s repos represent only the dumbest buyers who went exotic 0 down and heloc’d out all their equity that they gained 2003-2006. The next twelve months almost all of the exotic 0 downs will fail because they won’t be able to roll into another loan like that, they won’t be able to sell because they bought at peak and they don’t qualify for conventional financing. Even the few exotic lenders left won’t want to make a loan for 110% ltv in todays climate. So instead of 15% of the loans going bad, 30-50% will and there are twice as many, further depessing prices and making the fundamentals even worse. It’s a snowball effect. It takes most borrowers a little bit of time to get into trouble, after their reset they usually make the higher payments for a while, then it’s about 6 months before foreclosure so we see the real effects much later than the timeline of the graph, which means this fall the other shoe starts to drop and we don’t see the end until 2010.

Very telling graph, but as we know national information though insightful, is only somewhat relevant. The question is where are these loans resetting? I tend o think from what we hear that most are in the higher priced areas like So-Cal, but does anyone have any info on loans types by city, zip or even county would be interesting?

The numbers locally are even more dramatic.

Where are these loans? California Baby! And San Diego is the king!

Here’s a gem from exactly two years ago.

http://www.msnbc.msn.com/id/8171385/

BusinessWeek Interest-Only Loans across the U.S.

Rank Metro area Interest-only mortgages as share of total, 2004
1. San Diego 47.6%
2. Atlanta 45.5%
3. San Francisco 45.3%
4. Denver 43.4%
5. Oakland, Calif. 43.1%
6. San Jose, Calif. 41.1%
7. Phoenix-Mesa 38.3%
8. Seattle-Bellevue-Everett 37.2%
9. Orange County, Calif. 37.0%
10. Ventura, Calif. 35.3%

Roughly half of the peak buyers in San Diego owe their entire loan if not more and it makes them more exposed if rates were to rise, or should I say, continue to rise. Interest only doesnt mean interest only forever. It is merely a way to rent and freeze the price for 2-10 years, then pay the remaining 20-28 years at a higher payment than the 30 yr fixed that they couldn’t afford. It is a bet, like any other, that home prices will rise and interest rates will not. Looking back over the last two years, it wasn’t the right play.

According to the chart, the reaper has come calling on these people and he will stick around for about 2-3 years. I used to be excited that I was right but now I am starting to worry about friends and co-workers who drank the kool aid. You only get so much satisfaction from “I told you so.”

If anyone knows of a source for loan type data by year, and Zipcode or block group, please send it my way.

HiggyBaby