Treasury announces principal reduction initiative
Ah, Bank of America did not voluntarily agree to principal write downs on some 45,000 of Countrywide Mortgage loans because it was the right thing to do after all……… Now we know the true reason for that grand gesture………
78% of Option ARMs have yet to recast.
Here 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 particular post, he lays out simply why option ARMs will be the next big wave of foreclosure headache coming down the road. And the incredible fact is that according to him, 78% of these time bombs have yet to recast. On top of that, the bulk of these (58%) problem loans originated in California.
Talk about a problem coming down the road…..
Resetting of Alt A loans in the coming 24 months
I have been talking about the problems brewing in the Alt A and more specifically about Option ARM loan markets. Alt A loans reside between prime and sub-prime loans in terms of credit risk from a lender’s perspective and are characterized by the lack of documentation or proof of assets; they were often called Liar’s loans. A good explanation of Alt A can be found in this article.
CAR’s data regarding activities in Sub-Prime and Alt-A loans for 2009 revealed some disturbing trends in the coming months.
Look at the numbers of Alt-A loans out in the market: 632,215 or 5% of all loans in California. And of those, 70% are ARMs or adjustable rate mortgages – meaning their teaser rates will reset some time in the future. The bulk of the Sub prime mess has already reset and in the coming future only a small number is scheduled to reset in the next 24 months (15.6%). But look at Alt-A by comparison. Only 46.9% have already reset and look at the bomb that is ready to reset within the next 24 months as of May 2009! 40.4%! Unfortunately, there were no dollar figures associated with this graph. And buried in that number is the truly toxic Option ARM which is almost a guaranteed foreclosure simply waiting to happen. If people think the sub-prime mess is over, they are probably correct. But look at the beast that is coming down the road; we may only be half done.
