Excellent point NavyDoc. An ARM is an ARM regardless of it being Suprime, Alt-A, or prime.
1) If you read the AP story, below is what they say about Option ARMs and interest only ARMs.
2) But IN ADDITION to that, you have to add the regular ARMs that are reseting at higher interest rates.
2) FURTHERMORE, you need to add all the negative cash flow investments (fixed, ARMs or whatever) where they owners’ staying power is being eroded day by day. How long can investors (even prime) bleed cash before they go bankrupt? For Downtown SD, were’re probably talking about 80% of owners.
All the news that I read indicate that there’ll be 2 million +++ foreclosures before the mess is cleaned up.
“Lenders made an estimated $581 billion in option ARM loans during 2005 and 2006 while doling out nearly $1.4 trillion in interest-only ARMs, according to LoanPerformance. A recent study estimated about $325 billion of these loans will default, leading to more than 1 million homeowners relinquishing their property to lenders. By comparison, about $212 billion in subprime loans were delinquent through May. ”
” Christopher Cagan, CoreLogic’s director of research and analytics, predicts about 1.1 million ARMs totaling $325 billion will sink into foreclosure as rising monthly payments squeeze borrowers. After accounting for the money recovered through property sales, he expects the losses from the fallout to total $112 billion, with the damage spread out over six years. ”