Wednesday, October 15, 2008

More Mortgage Problems

I am afraid I agree with this article, that lays out a reason why the mortgage crisis will continue unabated:
It seems that the majority of investors, economists, and governmental leaders are overlooking a very important right hand side of this mortgage rate reset graph. The subprime loan reset period (represented by the green bars) may be nearing the end, but the lightly-shaded yellow bars represent $500 billion worth of option-ARM loans expected to reset from mid 2009 through 2012.
I also think the author is overlooking another factor, which is that 5/1 and 7/1 ARMs for non-subprime borrowers will also be re-setting in the next few years. The results may not be quite as catastrophic, but there will still be a lot of rate jumps, particularly if prevailing rates go up between now and then.

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