Dr. Housing Bubble 11/29/09

[Crewleader]

Option ARMs Come Back into Center Stage: 350,000 Active Option ARMs with over 200,000 in California. 78 Percent of Option ARMs have yet to hit Recast Dates.

Option ARMs are the gift that keeps on giving this holiday season. As it turns out, these pesky toxic mortgages are still sitting waiting to hit recast periods. Like a street vendor taco these things went down nicely and appeared cheap but came with a hefty aftermath. The last option ARMs were made in 2007 yet they are still causing much pain in the housing market. Attorney General Jerry Brown has requested data from the top 10 issuers of option ARMs with a deadline date of November 23. It’ll be interesting to see what is released from the AG’s office. However, Standard & Poors issued a report on option ARMs last week and found that much of the problems with these loans are still to come.

One of the stunning points found was that 93 percent of option ARM borrowers decided to go with the negative amortization option otherwise known as the “minimum payment” option. This is something we have established from many fronts and data sets. The bottom line is the vast majority went with negative amortization and this grew the actual balance owed. Yet one of the new findings in the report was that 78 percent of all outstanding option ARMs have yet to hit major recast points. Given that 58 percent of option ARMs are here in California, this is a one state wrecking ball:



http://www.doctorhousingbubble.com/option-arms-come-back-into-center-stage-350000-active-option-arms-with-over-200000-in-california-73-percent-of-option-arms-have-yet-to-hit-recast-dates/