PS wrote “In a market of rising interest rates, anyone who is not converting to a loan that is FIXED and PAYING PRINCIPAL, is in over their heads.”
IMO this should read “In a market of rising interest rates, anyone who CANNOT convert …”
My previous example in this post outlined a person who could convert, but would likely be better off not converting. That “hypothetical” person is real (but the loan numbers were numbers were scaled to be approx the same as PS’s example).
The 20%+ down IO people should be OK.
The 0% down, Neg Am, IO, with 1-year teaser rates are already in trouble
Other factors: Debtor’s net worth, income, etc.
Until we have data on I/O arms and associated data on the distribution of the net worth and incomes (or debt ratios) of those taking out these loans, it is difficult to predict whether MOST, SOME or ALL of these people will default, sell, get divorced, etc.
Who has these data ?
Maybe the lenders do !
What are they doing ?
