I e-mailed Ms. Simon to tell her this was a fabulous real estate expose. I heard that the ARM resets number is larger than they quoted: $2 trillion in the next 18 months.
As you said ybc, most of this is still in the pipeline. ARMs gained popularity in 2004, and most sales occur in summer. Thus, I think that most of the 2004 ARMs originated in summer 04, making them reset in summer 06. That will be the first big chunk of ARMs that reset.
With rising gas prices, we’ve got our first crop of squeezed ARM holders opening their higher mortgage payment notices in June – August 06. They will start exhausting their savings, finally either listing for sale or falling behind on their mortgage by end Dec. This means the bank will issue the first big crop of NODs in Q1 07, right when the recession hits. The Fed will be hit with high NOD data right when unemployment rises, and GDP hits a negative rate.
I expect the rate of NODs to make a big jump in winter 06, and keep climbing from then on. Until now, NODs have been very low, as the ARMs are still in the pipeline. Foreclosures are a very small subset of NODs, but that will change next year also.
