Bloomberg: Option ARMs Threaten Housing Rebound as Resets Peak
Started by evnyc
about 17 years ago
Posts: 1844
Member since: Aug 2008
Discussion about
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ_ZgC75Zfyw Because I think that much of the coverage on this problem has come through alternative news sources (blogs and so forth), I was surprised to see this pop up on Bloomberg. Selected quotes: "Shirley Breitmaier%u2019s mortgage payment started out at $98 when she refinanced her three-bedroom home in Galt, California, in 2007. The... [more]
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ_ZgC75Zfyw
Because I think that much of the coverage on this problem has come through alternative news sources (blogs and so forth), I was surprised to see this pop up on Bloomberg.
Selected quotes:
"Shirley Breitmaier%u2019s mortgage payment started out at $98 when she refinanced her three-bedroom home in Galt, California, in 2007. The 73-year-old widow may see it jump to $3,500 a month in two years."
....
Can I ask what the heck Shirley was planning to do when the stupid mortgage reset at 145% of the home's value? On what must be a retiree's income?
.....
"Shirley Breitmaier took out a $315,000 option ARM to refinance a previous loan on her house.
Her payments started at 3/8 of 1 percent, or less than $100 a month, according to Cameron Pannabecker, the owner of Cal-Pro Mortgage and the Mortgage Modification Center in Stockton, California, who is working with Breitmaier. The loan allowed her to forgo higher payments by adding the unpaid balance to the principal. She%u2019ll be required to start paying principal and interest to amortize the debt when the loan reaches 145 percent of the original amount borrowed."
....
"Breitmaier, who has been in the home for 45 years and lives with her daughter, now fears she will lose the off-white stucco house that%u2019s a hub for her family.
%u201CI wish the government would bail us out like the banks and the car businesses,%u201D she said. %u201CI%u2019d like to go from here to the grave next to my husband.%u201D "
....
What, paying $98 a month for a mortgage didn't ring any alarm bells? Maybe something was a wee bit off? No bailout!
....
"More than $750 billion of option ARMs were originated in the U.S. between 2004 and 2008, according to data from First American and Inside Mortgage Finance of Bethesda, Maryland. California accounted for 58 percent of option ARMs, according to a report by T2 Partners LLC, citing data from Amherst Securities and Loan Performance."
....
All those angry posters on the NYT victims thread, fire away, I won't protest.
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Response by nyc10022
about 17 years ago
Posts: 9868
Member since: Aug 2008
How about the fact that the 10 year treasury just hit 4% (up from 2%)
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Response by evnyc
about 17 years ago
Posts: 1844
Member since: Aug 2008
I was trying to be short and concise, but I probably just should have posted the entire thing:
"Refinancing is impossible in many states given the nationwide drop in prices. Mortgage rates are also rising. The average 30-year rate jumped to 5.59 percent in the week ended June 11 from 5.29 percent a week earlier, Freddie Mac said today. In California, the median existing single-family home price dropped 37 percent in April to $256,700 from a year earlier, according to the state Association of Realtors.
....
The delinquency rate for payment-option ARMs originated in 2006 and bundled into securities is soaring, according to a May 5 report from Deutsche Bank AG. Over the past year, payments 60 days late or more on option ARMs originated in 2006 have almost doubled to 42.44 percent from 23.26 percent, Deutsche Bank said. For 2007 loans, the rate has climbed from 10.1 percent to 35.25 percent."
OptionARMageddon, indeed.
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Response by sledgehammer
about 17 years ago
Posts: 899
Member since: Mar 2009
What are Californian banks gonna do with all these foreclosed properties? A bondfire?
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Response by alpine292
about 17 years ago
Posts: 2771
Member since: Jun 2008
foreclosed houses make great homes for ex-Gitmo detainees. I'm sure we can find a nice house in Stockton for Khalid Sheikh Muhammad.
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Response by evnyc
about 17 years ago
Posts: 1844
Member since: Aug 2008
hee! Sledge, that's very funny.
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Response by JuiceMan
about 17 years ago
Posts: 3578
Member since: Aug 2007
"How about the fact that the 10 year treasury just hit 4% (up from 2%)"
Exactly. This is the 10,000 pound gorilla. Who gives a shit about option ARM's?
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Response by evnyc
about 17 years ago
Posts: 1844
Member since: Aug 2008
Juiceman, I refer you to AboutReady's comment on another thread to answer your question:
"the option-ARMs are really a recast issue. the rates will matter, of course, but what will doom the homeowners even without rate increases is the fact that the principal owed will increase when the additional amounts outstanding are folded into the recast.
the interest rates issue will continue for all ARM loans still out there, which is why they tried so damned hard to get as many of the re-fid as possible."
As these suckers recast, they are going to tank what's left of the RE market.
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Response by 30yrs_RE_20_in_REO
about 17 years ago
Posts: 9911
Member since: Mar 2009
"Option ARMs Threaten Housing Rebound as Resets Peak "
There's gotta be a really good political cartoon to go with that caption. Too bad Kliban and Larson don't really do political.
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Response by jason10006
about 17 years ago
Posts: 5257
Member since: Jan 2009
"What are Californian banks gonna do with all these foreclosed properties? A bondfire?"
Those are held by global MBS, CDO, and other investors, or by global banks. Well Fargo was not a big player in this - the mortgage brokers were and they sold those all off, or in the case of Countrywide got bought by a NC-based bank.
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Response by aboutready
about 17 years ago
Posts: 16354
Member since: Oct 2007
jason, i think you're wrong about the wells fargo play. they had their "pick a pay" program, and i understand it was both huge and late to the game and its recast issues don't really occur until 2012.
And where do you think Wachovia went?
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Response by jason10006
about 17 years ago
Posts: 5257
Member since: Jan 2009
Wachovia you are right about, but Wells itself unlike most of their peers was not a big subprime lender. But the question was about "California banks" as though most of the loans in question weren't sold off to investors long ago. California banks are not at risk so much as the entire world.
How about the fact that the 10 year treasury just hit 4% (up from 2%)
I was trying to be short and concise, but I probably just should have posted the entire thing:
"Refinancing is impossible in many states given the nationwide drop in prices. Mortgage rates are also rising. The average 30-year rate jumped to 5.59 percent in the week ended June 11 from 5.29 percent a week earlier, Freddie Mac said today. In California, the median existing single-family home price dropped 37 percent in April to $256,700 from a year earlier, according to the state Association of Realtors.
....
The delinquency rate for payment-option ARMs originated in 2006 and bundled into securities is soaring, according to a May 5 report from Deutsche Bank AG. Over the past year, payments 60 days late or more on option ARMs originated in 2006 have almost doubled to 42.44 percent from 23.26 percent, Deutsche Bank said. For 2007 loans, the rate has climbed from 10.1 percent to 35.25 percent."
OptionARMageddon, indeed.
What are Californian banks gonna do with all these foreclosed properties? A bondfire?
foreclosed houses make great homes for ex-Gitmo detainees. I'm sure we can find a nice house in Stockton for Khalid Sheikh Muhammad.
hee! Sledge, that's very funny.
"How about the fact that the 10 year treasury just hit 4% (up from 2%)"
Exactly. This is the 10,000 pound gorilla. Who gives a shit about option ARM's?
Juiceman, I refer you to AboutReady's comment on another thread to answer your question:
"the option-ARMs are really a recast issue. the rates will matter, of course, but what will doom the homeowners even without rate increases is the fact that the principal owed will increase when the additional amounts outstanding are folded into the recast.
the interest rates issue will continue for all ARM loans still out there, which is why they tried so damned hard to get as many of the re-fid as possible."
http://www.streeteasy.com/nyc/talk/discussion/11885-are-we-done-with-foreclosures
As these suckers recast, they are going to tank what's left of the RE market.
"Option ARMs Threaten Housing Rebound as Resets Peak "
There's gotta be a really good political cartoon to go with that caption. Too bad Kliban and Larson don't really do political.
"What are Californian banks gonna do with all these foreclosed properties? A bondfire?"
Those are held by global MBS, CDO, and other investors, or by global banks. Well Fargo was not a big player in this - the mortgage brokers were and they sold those all off, or in the case of Countrywide got bought by a NC-based bank.
jason, i think you're wrong about the wells fargo play. they had their "pick a pay" program, and i understand it was both huge and late to the game and its recast issues don't really occur until 2012.
And where do you think Wachovia went?
Wachovia you are right about, but Wells itself unlike most of their peers was not a big subprime lender. But the question was about "California banks" as though most of the loans in question weren't sold off to investors long ago. California banks are not at risk so much as the entire world.