What do you mean sub-2% ??
There were no 2% SP loans….
The 1%-2% PAY RATES were 7%++ loans that were neg am, and are not covered by Bush/Paulson
There is isn’t an exact “typical” subprime loan, that was originated 1n 2005-2006.
If somebody had a 5% start rate fixed for 2 years with an interest only minimum payment, their first rate adjustment after two years (2/28 or 2/38) could be 2 points, making their rate 7%. In itself, that would be a 40% jump in interest payment.
However,
It would probably recast to a 28 year amortization, making the payment $2039 (63% higher)
OR
a 38 year amortization making the payment $1883 (50% higher)
This payment would only be in effect for 6 or 12 months max, before it would adjust higher again.
Nobody will have an increase that is 100% or higher, nor anything that would be much lower than 20-25%.
The sad thing is that these loans were never intended to be a long term loan, but a short term band-aid loan.
Unfortunately the scum of the mortgage industry didn’t explain it to borrower’s that way.
As of today, there are still more than 80% of subprime borrowers paying their loans. I expect this to change for the worse in many areas as rates adjust higher and folks simply cannot qualify for a refi.
