Mortgage Rate Resets by Credit Suisse-The Shift from Subprime to Option Adjustable Rate
Nov 13th 2008
Categories: Mortgage News, Real Estate News
hi
Mortgage Rate Resets
I run across this graph that Credit Suisse published last year. The era of huge volumes of sub primes resets is almost over and 2009 looks like a year of transition between a high volume of sub prime mortgages resets and a very high volume of Option Adjustable Rate Mortgages Resets that will take place on 2010 and 2011.
With the announcement by Citigroup that they will offer a moratorium on foreclosures, which will probably be followed by other lenders, I leave to the finances experts to comment on the impact it might have in the Real Estate Market.
Dear Ines
This is a great graphic . Thank you for sharing .
As you could observe the next two big resets come from Alt A and Option ARMs.
The challenge with the Option ARM’s reset is that a huge percentage of those borrowers had just been qualified based on their minimum payment instead of the fully amortized payment and today, few of these homeowners barely are able to meet their interest only payment.
Consequently, even with a new proposed Debt to Income Ratio of 38% as an eligibility requirement to be refinanced with help of the Hope Alliance, it will be very difficult for some lenders to avoid foreclosures.
Ines,
As Ariel points out the Alt-A portfolio, which is several time the size of the subprime portfolio, is the preverbal “other shoe” and is about to drop.
To my knowledge thus far, the only institution that is proactively addressing the Alt-A portfolio with success is the now defunct IndyMac Bank which if you recall was taken into receivorship last summer.
Most recently there has been talk on Capital Hill about giving Bankruptcy Judges the ability to modify existing mortgages…this is perhaps the worst idea yet as it would kill investor appetite for mortgage backed securities sending mortgage interest rates into double digits and thus killing any hope of a meaningful recovery in the housing market for years to come.
Arien and James,
Thanks for your input. That is what I was looking for…expert’s opinions.
For those looking for more information on Alt-A mortgages go to: http://en.wikipedia.org/wiki/Alt-A
Let’s see what time brings.
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