Rate resets for loans originated in the 2003 – 2006 time frame for Alt-A or prime loans were typically based on the 6-month or 1-year LIBOR index, with margins of typically 2.25%.
Current 1-year LIBOR index : 2.71%
This means that loans re-setting in the near future are likely to re-set at rates in the low 5% range. Some folks who took out 5-year ARMs in 2003 will have their loans reset lower than their original rate.
They may still be in tenuous condition as short-term rates could spike in the next couple of years. But one must consider what prevailing rates are re-setting, not just the fact that x billion dollars in loans will re-set and assume that all the buyers are screwed.
