$30 Billion Time bomb ready to go off
Article
I have been of the opinion, that our next wave of problem mortgages will be the option ARMs. Here is a situation where many homeowners took a chance at a gamble and failed; and the bill is coming due very soon with most being unable to meet their obligations. If this is not a recipe for disaster, I don’t know what is…….. None of these homeowners will be eligible to re-finance these loans, so their future is laid out for them already.
Finally some hard data for the Bay Area has been revealed. Between 47,000-57,000 loans with a value of $28 – $31 Billion in option ARMs are located here in the Bay Area. The bulk of these are set to re-cast between 2010 – 2012. Here are some additional details.
| Metropolitan statistical area | % of all home loans originated 2004-08 that were option ARMs | % of 2004-08 option ARMs that are 60-plus days delinquent or in foreclosure |
| San Francisco-Oakland-Fremont (San Francisco, Alameda, Contra Costa, Marin, San Mateo counties) | 19.52% | 27.23% |
| San Jose-Sunnyvale-Santa Clara (Santa Clara and San Benito counties) | 19.32% | 28.36% |
| Santa Rosa-Petaluma (Sonoma County) | 25.31% | 24.94% |
| Vallejo-Fairfield (Solano County) | 28.12% | 36.91% |
$584,000
Average option ARM loan in 5-county S.F. metro region
54,000
Number of option ARMs in Bay Area
$30.9 billion
Bay Area option ARM loan balance
Source: First American CoreLogic
94%
Borrowers who make minimum monthly payments
79%
Average loan-to-value ratio when loans were made
126%
Average loan-to-value ratio now
39.3%
Option ARM borrowers who are 60+ days delinquent
[...] Here is a fantastic blog entry from Jeff Georghan, which goes into detail as t why the foreclosure mess will be WORSE before it get better. I felt deserved to be re-posted. Jeff is obviously correct, but remember, he is speaking primarily of Prime Loans and mentions in passing negative equity but not its cause; his analysis does not delve into the coming option ARMs (negative equity loans) crisis. [...]
[...] is one of my favorite bloggers who writes often about a topic very close to my heart: the option ARM fiasco brewing in California. He has access to and extrapolates some amazing data. I wish I had access to such data. In this [...]