[quote]17% of option arms have already resulted in foreclosure[/quote]
There’s a big difference between “more than 17% in foreclosure” and “17% of option arms have already resulted in foreclosure”.
There are three stages of the process.
(1) When payments on the loan are 90 days late, the loan is called “seriously delinquent”.
(2) Three+ months later, the homeowner is served with a NOTS and the loan is called “in foreclosure”.
(3) NOTS results in a sale at auction steps, house becomes a REO, it’s sold by the bank to a third party. The moment the bank receives money from the sale, the loan disappears from the books.
What the article means to say is that, at this moment, 17% of all REMAINING loans in that portfolio are in stage 2. We have no way of knowing (from the article) how many loans are still there and how many are already gone. In all likelihood, numbers are ugly. About 40% of 2006 vintage option ARMs were already seriously delinquent or in foreclosure as of a year ago (December 2008). My guess would be that 50%, tops, of all 2006 vintage option ARMs are still on the books today, 40% of those delinquent or in foreclosure.
