questioning the option arm timebomb thesis

[Eugene]

[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.

http://files.ots.treas.gov/1310191.pdf

Look at the lower-left chart on page 14.

[sdrealtor]

Just because a loan is low/no doc that does not mean it is doomed. I had one on an investment property that i flipped a few years back and it was paid off when I sold a few years ago. I have a friend that bought 5 investment properties and has sold all of them off already. I know self-employed people with OA that just cant document income so they used them. I dont pretend to know what percentage of the OA’s are legitimate and what are “liar loans” but they cant all be bad. Based upon what I see the liars were the weakest hands and most likely to walk quickly when underwater. I dont think its a stetch to think that a high percentage (how high I dont know) have already gone bad.

[sdrealtor]

Just because a loan is low/no doc that does not mean it is doomed. I had one on an investment property that i flipped a few years back and it was paid off when I sold a few years ago. I have a friend that bought 5 investment properties and has sold all of them off already. I know self-employed people with OA that just cant document income so they used them. I dont pretend to know what percentage of the OA’s are legitimate and what are “liar loans” but they cant all be bad. Based upon what I see the liars were the weakest hands and most likely to walk quickly when underwater. I dont think its a stetch to think that a high percentage (how high I dont know) have already gone bad.

[sdrealtor]

Just because a loan is low/no doc that does not mean it is doomed. I had one on an investment property that i flipped a few years back and it was paid off when I sold a few years ago. I have a friend that bought 5 investment properties and has sold all of them off already. I know self-employed people with OA that just cant document income so they used them. I dont pretend to know what percentage of the OA’s are legitimate and what are “liar loans” but they cant all be bad. Based upon what I see the liars were the weakest hands and most likely to walk quickly when underwater. I dont think its a stetch to think that a high percentage (how high I dont know) have already gone bad.

[sdrealtor]

Just because a loan is low/no doc that does not mean it is doomed. I had one on an investment property that i flipped a few years back and it was paid off when I sold a few years ago. I have a friend that bought 5 investment properties and has sold all of them off already. I know self-employed people with OA that just cant document income so they used them. I dont pretend to know what percentage of the OA’s are legitimate and what are “liar loans” but they cant all be bad. Based upon what I see the liars were the weakest hands and most likely to walk quickly when underwater. I dont think its a stetch to think that a high percentage (how high I dont know) have already gone bad.

[sdrealtor]

Just because a loan is low/no doc that does not mean it is doomed. I had one on an investment property that i flipped a few years back and it was paid off when I sold a few years ago. I have a friend that bought 5 investment properties and has sold all of them off already. I know self-employed people with OA that just cant document income so they used them. I dont pretend to know what percentage of the OA’s are legitimate and what are “liar loans” but they cant all be bad. Based upon what I see the liars were the weakest hands and most likely to walk quickly when underwater. I dont think its a stetch to think that a high percentage (how high I dont know) have already gone bad.

[patientrenter]

[quote=sdrealtor]…..I know self-employed people with OA that just cant document income so they used them….[/quote]

It’s fascinating to me how many ‘respectable’ pillars of society accept obvious income tax fraud as perfectly normal.

[patientrenter]

[quote=sdrealtor]…..I know self-employed people with OA that just cant document income so they used them….[/quote]

It’s fascinating to me how many ‘respectable’ pillars of society accept obvious income tax fraud as perfectly normal.

[patientrenter]

[quote=sdrealtor]…..I know self-employed people with OA that just cant document income so they used them….[/quote]

It’s fascinating to me how many ‘respectable’ pillars of society accept obvious income tax fraud as perfectly normal.

[patientrenter]

[quote=sdrealtor]…..I know self-employed people with OA that just cant document income so they used them….[/quote]

It’s fascinating to me how many ‘respectable’ pillars of society accept obvious income tax fraud as perfectly normal.

[patientrenter]

[quote=sdrealtor]…..I know self-employed people with OA that just cant document income so they used them….[/quote]

It’s fascinating to me how many ‘respectable’ pillars of society accept obvious income tax fraud as perfectly normal.

[sdrealtor]

I would also tend to beleive that 50% or more of the OA’s originated during or prior to 2006 are already gone.

FYI, Its not always tax fraud but rather savy tax planning using corporations and agressive interpretation (but not fraudulent) of tax codes.

Another example. My 80 yr old uncle will show about $20K on his tax return this year. He and my aunt are in assisted living and everything is paid for by long term care insurance. There are no minimum distributions on his IRA’s this year which would be well into 6 figures. He would have a hard time getting a $200K loan for a condo. He could pay cash for the whole complex.

[sdrealtor]

I would also tend to beleive that 50% or more of the OA’s originated during or prior to 2006 are already gone.

FYI, Its not always tax fraud but rather savy tax planning using corporations and agressive interpretation (but not fraudulent) of tax codes.

Another example. My 80 yr old uncle will show about $20K on his tax return this year. He and my aunt are in assisted living and everything is paid for by long term care insurance. There are no minimum distributions on his IRA’s this year which would be well into 6 figures. He would have a hard time getting a $200K loan for a condo. He could pay cash for the whole complex.

[sdrealtor]

I would also tend to beleive that 50% or more of the OA’s originated during or prior to 2006 are already gone.

FYI, Its not always tax fraud but rather savy tax planning using corporations and agressive interpretation (but not fraudulent) of tax codes.

Another example. My 80 yr old uncle will show about $20K on his tax return this year. He and my aunt are in assisted living and everything is paid for by long term care insurance. There are no minimum distributions on his IRA’s this year which would be well into 6 figures. He would have a hard time getting a $200K loan for a condo. He could pay cash for the whole complex.

[sdrealtor]

I would also tend to beleive that 50% or more of the OA’s originated during or prior to 2006 are already gone.

FYI, Its not always tax fraud but rather savy tax planning using corporations and agressive interpretation (but not fraudulent) of tax codes.

Another example. My 80 yr old uncle will show about $20K on his tax return this year. He and my aunt are in assisted living and everything is paid for by long term care insurance. There are no minimum distributions on his IRA’s this year which would be well into 6 figures. He would have a hard time getting a $200K loan for a condo. He could pay cash for the whole complex.

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