Option ARMs & Alt-A resets

[34f3f3f]

This topic has been a bit conspicuous by it’s absence, and I was wondering if banks are still too busy licking their wounds to think about it. Mr Mortgage puts forward a strong case for concern using fairly official looking stats. Does anyone have any idea whether a) this is still a big problem, b) whether the bail out has addressed it, and c) are banks going to get clobbered again, and if so which ones?

[Aecetia]

“Alt-A Loan Resets Continuing Through 2011
Take a look at the chart below. Taken on its face value alone, we are certainly not out of the woods with regard to mortgage resets.”

http://commercialwatch.blogspot.com/2008/09/alt-loan-resets-continuing-through-2011.html

[capeman]

Aecetia- That chart is outdated. The schedule for Alt-A resets has moved forward by about 2 years due to most people paying only minimum payments and triggering principle caps. This chart better represents the situation but since it is a few months old it is probably also outdated. The peak is likely to be sometime mid next year due to the acceleration of resets. That is a big reason why Wachovia and WAMU went down so soon rather than later as they were the big players in this mortgage product space.

[img_assist|nid=8526|title=Revised Alt-A Reset chart due to Pay Option ARMs|desc=|link=node|align=left|width=400|height=227]

[(former)FormerSanDiegan]

This is an option ARM chart. Not Alt-A.

Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs

Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…

[capeman]

Yeah but if you integrate the Alt-A chart and subtract out the Option Arm chart you get the Option Arms being about 50% of the total products resetting at EOY 2011. That means roughly 50% of the big chart is on the accelerated schedule…. that’s devastating and may mean even another equally large wave is coming after the end of next year. Bye bye housing.

[SD Realtor]

Left on thier own both ALT-A and Option Arms are more then a little problematic.

That is, left on thier own.

[SD Realtor]

Left on thier own both ALT-A and Option Arms are more then a little problematic.

That is, left on thier own.

[SD Realtor]

Left on thier own both ALT-A and Option Arms are more then a little problematic.

That is, left on thier own.

[SD Realtor]

Left on thier own both ALT-A and Option Arms are more then a little problematic.

That is, left on thier own.

[SD Realtor]

Left on thier own both ALT-A and Option Arms are more then a little problematic.

That is, left on thier own.

[capeman]

Yeah but if you integrate the Alt-A chart and subtract out the Option Arm chart you get the Option Arms being about 50% of the total products resetting at EOY 2011. That means roughly 50% of the big chart is on the accelerated schedule…. that’s devastating and may mean even another equally large wave is coming after the end of next year. Bye bye housing.

[capeman]

Yeah but if you integrate the Alt-A chart and subtract out the Option Arm chart you get the Option Arms being about 50% of the total products resetting at EOY 2011. That means roughly 50% of the big chart is on the accelerated schedule…. that’s devastating and may mean even another equally large wave is coming after the end of next year. Bye bye housing.

[capeman]

Yeah but if you integrate the Alt-A chart and subtract out the Option Arm chart you get the Option Arms being about 50% of the total products resetting at EOY 2011. That means roughly 50% of the big chart is on the accelerated schedule…. that’s devastating and may mean even another equally large wave is coming after the end of next year. Bye bye housing.

[capeman]

Yeah but if you integrate the Alt-A chart and subtract out the Option Arm chart you get the Option Arms being about 50% of the total products resetting at EOY 2011. That means roughly 50% of the big chart is on the accelerated schedule…. that’s devastating and may mean even another equally large wave is coming after the end of next year. Bye bye housing.

[(former)FormerSanDiegan]

This is an option ARM chart. Not Alt-A.

Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs

Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…

[(former)FormerSanDiegan]

This is an option ARM chart. Not Alt-A.

Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs

Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…

[(former)FormerSanDiegan]

This is an option ARM chart. Not Alt-A.

Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs

Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…

[(former)FormerSanDiegan]

This is an option ARM chart. Not Alt-A.

Some people have a hard time distinguishing these. I blame Mr Mortgage because when he talks about alt-A he focuses on the subset of alt-A that includes option ARMs

Some portion of alt-A loans are option ARMs, but the alt-A universe also includes fixed rate loans, 5/1 ARMs, 5/1 I/O ARMS, etc…

[(former)FormerSanDiegan]

I believe that folks with option ARMs are toast.

However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.

The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.

Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.

Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.

[34f3f3f]

[quote=FormerSanDiegan]
I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
[/quote]

This makes sense, but how big of a problem is option ARMs going to be for banks. If toxic subprime loans caused lending to seize up, what is the effect of option ARMs going to be, assuming that it hasn’t already been effecting things?

[34f3f3f]

[quote=FormerSanDiegan]
I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
[/quote]

This makes sense, but how big of a problem is option ARMs going to be for banks. If toxic subprime loans caused lending to seize up, what is the effect of option ARMs going to be, assuming that it hasn’t already been effecting things?

[34f3f3f]

[quote=FormerSanDiegan]
I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
[/quote]

This makes sense, but how big of a problem is option ARMs going to be for banks. If toxic subprime loans caused lending to seize up, what is the effect of option ARMs going to be, assuming that it hasn’t already been effecting things?

[34f3f3f]

[quote=FormerSanDiegan]
I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
[/quote]

This makes sense, but how big of a problem is option ARMs going to be for banks. If toxic subprime loans caused lending to seize up, what is the effect of option ARMs going to be, assuming that it hasn’t already been effecting things?

[34f3f3f]

[quote=FormerSanDiegan]
I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.
[/quote]

This makes sense, but how big of a problem is option ARMs going to be for banks. If toxic subprime loans caused lending to seize up, what is the effect of option ARMs going to be, assuming that it hasn’t already been effecting things?

[(former)FormerSanDiegan]

I believe that folks with option ARMs are toast.

However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.

The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.

Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.

Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.

[(former)FormerSanDiegan]

I believe that folks with option ARMs are toast.

However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.

The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.

Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.

Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.

[(former)FormerSanDiegan]

I believe that folks with option ARMs are toast.

However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.

The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.

Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.

Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.

[(former)FormerSanDiegan]

I believe that folks with option ARMs are toast.

However, fate of the remaining alt-A loans and prime loans with resets in between now and 2011 will depend on rates.

The typical alt-A 5/1 loan originated in 2005 for example had a start rate of between 5.5 to 6%, fixed for 5 years. These are tied to an index and will reset at that index, plus a margin.
Typical index is the 12-months LIBOR. Margin of 2.25 to 2.5%.

Based on current 12-month LIBOR index, these would reset to the 12-month LIBOR plus 2.25 to 2.5 %, which would put them at 5.75 to 6%.

Outside of the option ARMS, the rate itself and even the inclusion of principal is not enough to trigger rampant defaults. I don’t think resets by themselves outside of the option ARMS are going to be as much of a factor as the fact that property values have declined to the point where the owner is underwater.

[capeman]

Aecetia- That chart is outdated. The schedule for Alt-A resets has moved forward by about 2 years due to most people paying only minimum payments and triggering principle caps. This chart better represents the situation but since it is a few months old it is probably also outdated. The peak is likely to be sometime mid next year due to the acceleration of resets. That is a big reason why Wachovia and WAMU went down so soon rather than later as they were the big players in this mortgage product space.

[img_assist|nid=8526|title=Revised Alt-A Reset chart due to Pay Option ARMs|desc=|link=node|align=left|width=400|height=227]

[capeman]

Aecetia- That chart is outdated. The schedule for Alt-A resets has moved forward by about 2 years due to most people paying only minimum payments and triggering principle caps. This chart better represents the situation but since it is a few months old it is probably also outdated. The peak is likely to be sometime mid next year due to the acceleration of resets. That is a big reason why Wachovia and WAMU went down so soon rather than later as they were the big players in this mortgage product space.

[img_assist|nid=8526|title=Revised Alt-A Reset chart due to Pay Option ARMs|desc=|link=node|align=left|width=400|height=227]

[capeman]

Aecetia- That chart is outdated. The schedule for Alt-A resets has moved forward by about 2 years due to most people paying only minimum payments and triggering principle caps. This chart better represents the situation but since it is a few months old it is probably also outdated. The peak is likely to be sometime mid next year due to the acceleration of resets. That is a big reason why Wachovia and WAMU went down so soon rather than later as they were the big players in this mortgage product space.

[img_assist|nid=8526|title=Revised Alt-A Reset chart due to Pay Option ARMs|desc=|link=node|align=left|width=400|height=227]

[capeman]

Aecetia- That chart is outdated. The schedule for Alt-A resets has moved forward by about 2 years due to most people paying only minimum payments and triggering principle caps. This chart better represents the situation but since it is a few months old it is probably also outdated. The peak is likely to be sometime mid next year due to the acceleration of resets. That is a big reason why Wachovia and WAMU went down so soon rather than later as they were the big players in this mortgage product space.

[img_assist|nid=8526|title=Revised Alt-A Reset chart due to Pay Option ARMs|desc=|link=node|align=left|width=400|height=227]

[Aecetia]

“Alt-A Loan Resets Continuing Through 2011
Take a look at the chart below. Taken on its face value alone, we are certainly not out of the woods with regard to mortgage resets.”

http://commercialwatch.blogspot.com/2008/09/alt-loan-resets-continuing-through-2011.html

[Aecetia]

“Alt-A Loan Resets Continuing Through 2011
Take a look at the chart below. Taken on its face value alone, we are certainly not out of the woods with regard to mortgage resets.”

http://commercialwatch.blogspot.com/2008/09/alt-loan-resets-continuing-through-2011.html

[Aecetia]

“Alt-A Loan Resets Continuing Through 2011
Take a look at the chart below. Taken on its face value alone, we are certainly not out of the woods with regard to mortgage resets.”

http://commercialwatch.blogspot.com/2008/09/alt-loan-resets-continuing-through-2011.html

[Aecetia]

“Alt-A Loan Resets Continuing Through 2011
Take a look at the chart below. Taken on its face value alone, we are certainly not out of the woods with regard to mortgage resets.”

http://commercialwatch.blogspot.com/2008/09/alt-loan-resets-continuing-through-2011.html

[patb]

most option Arms will go bad because the rate shoots up like crazy
due to the sudden increase in amortization

you have to remember you are not only amortizing over 25 years
a 30 year mortgage, but you also have 5 years delayed interest

mostamericans have zero savings so these option arms are just death

[34f3f3f]

I hear loud and clear that this is bad news, but anyone care to try and quantify the what, where and when. Are we in for another wave (or continuation) of bank insolvencies, credit freezes, and stock market roller coasters?

[34f3f3f]

I hear loud and clear that this is bad news, but anyone care to try and quantify the what, where and when. Are we in for another wave (or continuation) of bank insolvencies, credit freezes, and stock market roller coasters?

[34f3f3f]

I hear loud and clear that this is bad news, but anyone care to try and quantify the what, where and when. Are we in for another wave (or continuation) of bank insolvencies, credit freezes, and stock market roller coasters?

[34f3f3f]

I hear loud and clear that this is bad news, but anyone care to try and quantify the what, where and when. Are we in for another wave (or continuation) of bank insolvencies, credit freezes, and stock market roller coasters?

[34f3f3f]

I hear loud and clear that this is bad news, but anyone care to try and quantify the what, where and when. Are we in for another wave (or continuation) of bank insolvencies, credit freezes, and stock market roller coasters?

[patb]

most option Arms will go bad because the rate shoots up like crazy
due to the sudden increase in amortization

you have to remember you are not only amortizing over 25 years
a 30 year mortgage, but you also have 5 years delayed interest

mostamericans have zero savings so these option arms are just death

[patb]

most option Arms will go bad because the rate shoots up like crazy
due to the sudden increase in amortization

you have to remember you are not only amortizing over 25 years
a 30 year mortgage, but you also have 5 years delayed interest

mostamericans have zero savings so these option arms are just death

[patb]

most option Arms will go bad because the rate shoots up like crazy
due to the sudden increase in amortization

you have to remember you are not only amortizing over 25 years
a 30 year mortgage, but you also have 5 years delayed interest

mostamericans have zero savings so these option arms are just death

[patb]

most option Arms will go bad because the rate shoots up like crazy
due to the sudden increase in amortization

you have to remember you are not only amortizing over 25 years
a 30 year mortgage, but you also have 5 years delayed interest

mostamericans have zero savings so these option arms are just death

[Author]

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