According to Cagan (at least on February 14, 2006), it doesn’t matter what the numbers are as it won’t have much of an effect anyway. Excerpt:
Entitled “Mortgage Payment Reset: The Rumor and the Reality,” by Christopher Cagan, Ph.D., director of research and analytics at First American Real Estate Solutions, the study utilizes the extensive database and analytical resources of First American RES and its subsidiary LoanPerformance to classify market segments as relatively safe or vulnerable under the pressure of mortgage payment resets. The most vulnerable will be those who do not have substantial equity in their homes, but hold adjustable rate mortgages (ARMs) with low initial rates, often with interest-only and negative-amortization features.
The study concludes, however, that while individual families and firms that are involved with the riskiest loans may suffer, on a national basis the impact of mortgage payment reset and subsequent default will not significantly impact the economy, as it will result in approximately $110 billion in losses, or less than 1 percent of total U.S. mortgage lending annually.
