This guy is not getting the dynamic info on Alt-A. I personally haven’t seen the data myself as to how much Alt-A is really out there but the consensus is about $600B. The most important and damaging part of that seems to be the Pay Option ARM products in the Alt-A space. With estimated $500B in Pay Option out there that would be about 80% of Alt-A. Then you have articles out there saying that…
Up to 80% of all option ARM borrowers make only the minimum payment each month, according to Fitch Ratings. The rest of the money gets added to the balance of the mortgage, a situation known as negative amortization.
There seem to be principle caps on the loans and as 80% of the buyers are effectively running Neg-Am on their loans the resets are happening quicker that expected a-la this graph…
[img_assist|nid=8526|title=Revised Alt-A Reset chart due to Pay Option ARMs|desc=|link=node|align=left|width=400|height=227]
Based on the original reset pattern the guy was on it but with this new wave coming much faster than expected it’s going to couple with what is already going on to make a real mess. This wave will likely take Wamu, Wachovia and Wells Fargo out to the woodshed.
