Subprime Interest Resets

[DWCAP]

So I read this article today on patrick.net. It is about how this is the height of the subprime resets and that it will abate soon. It goes on to talk about how a 200k loan will only reset about $70 higher now where in December it would have been $450.
I didnt know these loans only reset once. I kinda thought they reset at the end of 1-3 year intro-periods and then annually after that. If that isnt true, no wonder BB has rates so low, it is a RE bailout that would actually work.

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/30/AR2008063001848.html?referrer=emailarticle&ref

[noone]

There’s really not enough information in that article.

Though there are some types of loans that would only go up about $70 per month if they reset now, those same loans would only have gone up about $70 if they reset in December. The type of loans that would have reset by $450 in December will still reset by about $450. The mortgage interest rates have hardly changed. They were down at the beginning of the year, but are back up now. Some mortgage rates are even higher than they were in December

http://mortgage-x.com/trends.htm

Even the next paragraph in that article says “others still face a rate shock because they had an artificially low introductory rate”

Those loans that are going up by several percentage points are doing so because they started out with the “teaser” rates that the article mentions. You are correct that the interest rate on ARMs continue to fluctuate even after the introductory period, generally this is annually. The interest rate changes after the introductory period will not be as great. Usually there is a cap on how much the difference can be from one year to the next regardless of what the prime rate does.

So basically if the borrower can survive the initial large jump, then it is likely that they can survive the smaller increases (or decreases) that come in the future.

[noone]

There’s really not enough information in that article.

Though there are some types of loans that would only go up about $70 per month if they reset now, those same loans would only have gone up about $70 if they reset in December. The type of loans that would have reset by $450 in December will still reset by about $450. The mortgage interest rates have hardly changed. They were down at the beginning of the year, but are back up now. Some mortgage rates are even higher than they were in December

http://mortgage-x.com/trends.htm

Even the next paragraph in that article says “others still face a rate shock because they had an artificially low introductory rate”

Those loans that are going up by several percentage points are doing so because they started out with the “teaser” rates that the article mentions. You are correct that the interest rate on ARMs continue to fluctuate even after the introductory period, generally this is annually. The interest rate changes after the introductory period will not be as great. Usually there is a cap on how much the difference can be from one year to the next regardless of what the prime rate does.

So basically if the borrower can survive the initial large jump, then it is likely that they can survive the smaller increases (or decreases) that come in the future.

[noone]

There’s really not enough information in that article.

Though there are some types of loans that would only go up about $70 per month if they reset now, those same loans would only have gone up about $70 if they reset in December. The type of loans that would have reset by $450 in December will still reset by about $450. The mortgage interest rates have hardly changed. They were down at the beginning of the year, but are back up now. Some mortgage rates are even higher than they were in December

http://mortgage-x.com/trends.htm

Even the next paragraph in that article says “others still face a rate shock because they had an artificially low introductory rate”

Those loans that are going up by several percentage points are doing so because they started out with the “teaser” rates that the article mentions. You are correct that the interest rate on ARMs continue to fluctuate even after the introductory period, generally this is annually. The interest rate changes after the introductory period will not be as great. Usually there is a cap on how much the difference can be from one year to the next regardless of what the prime rate does.

So basically if the borrower can survive the initial large jump, then it is likely that they can survive the smaller increases (or decreases) that come in the future.

[noone]

There’s really not enough information in that article.

Though there are some types of loans that would only go up about $70 per month if they reset now, those same loans would only have gone up about $70 if they reset in December. The type of loans that would have reset by $450 in December will still reset by about $450. The mortgage interest rates have hardly changed. They were down at the beginning of the year, but are back up now. Some mortgage rates are even higher than they were in December

http://mortgage-x.com/trends.htm

Even the next paragraph in that article says “others still face a rate shock because they had an artificially low introductory rate”

Those loans that are going up by several percentage points are doing so because they started out with the “teaser” rates that the article mentions. You are correct that the interest rate on ARMs continue to fluctuate even after the introductory period, generally this is annually. The interest rate changes after the introductory period will not be as great. Usually there is a cap on how much the difference can be from one year to the next regardless of what the prime rate does.

So basically if the borrower can survive the initial large jump, then it is likely that they can survive the smaller increases (or decreases) that come in the future.

[noone]

There’s really not enough information in that article.

Though there are some types of loans that would only go up about $70 per month if they reset now, those same loans would only have gone up about $70 if they reset in December. The type of loans that would have reset by $450 in December will still reset by about $450. The mortgage interest rates have hardly changed. They were down at the beginning of the year, but are back up now. Some mortgage rates are even higher than they were in December

http://mortgage-x.com/trends.htm

Even the next paragraph in that article says “others still face a rate shock because they had an artificially low introductory rate”

Those loans that are going up by several percentage points are doing so because they started out with the “teaser” rates that the article mentions. You are correct that the interest rate on ARMs continue to fluctuate even after the introductory period, generally this is annually. The interest rate changes after the introductory period will not be as great. Usually there is a cap on how much the difference can be from one year to the next regardless of what the prime rate does.

So basically if the borrower can survive the initial large jump, then it is likely that they can survive the smaller increases (or decreases) that come in the future.

[patb]

This article was poorly written, because it failed to explain how
a subprime ARM works.

What happens is that instead of getting 30 year money
an ARM uses short term money 12-24 month money so it
requires continous rolling resets.

The hazard is bernanke has been forcing short term rates
into the sewer. Once those rates rise again, ARM holders will
find themselves screwed again.

Bernanke is desperately trying to help wall street out,
for now.

[patb]

This article was poorly written, because it failed to explain how
a subprime ARM works.

What happens is that instead of getting 30 year money
an ARM uses short term money 12-24 month money so it
requires continous rolling resets.

The hazard is bernanke has been forcing short term rates
into the sewer. Once those rates rise again, ARM holders will
find themselves screwed again.

Bernanke is desperately trying to help wall street out,
for now.

[patb]

This article was poorly written, because it failed to explain how
a subprime ARM works.

What happens is that instead of getting 30 year money
an ARM uses short term money 12-24 month money so it
requires continous rolling resets.

The hazard is bernanke has been forcing short term rates
into the sewer. Once those rates rise again, ARM holders will
find themselves screwed again.

Bernanke is desperately trying to help wall street out,
for now.

[patb]

This article was poorly written, because it failed to explain how
a subprime ARM works.

What happens is that instead of getting 30 year money
an ARM uses short term money 12-24 month money so it
requires continous rolling resets.

The hazard is bernanke has been forcing short term rates
into the sewer. Once those rates rise again, ARM holders will
find themselves screwed again.

Bernanke is desperately trying to help wall street out,
for now.

[patb]

This article was poorly written, because it failed to explain how
a subprime ARM works.

What happens is that instead of getting 30 year money
an ARM uses short term money 12-24 month money so it
requires continous rolling resets.

The hazard is bernanke has been forcing short term rates
into the sewer. Once those rates rise again, ARM holders will
find themselves screwed again.

Bernanke is desperately trying to help wall street out,
for now.

[Author]

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