...is the subtle beginning to a small 4 paragraph article that appears in The Economists. I had an open mic last week and I ranted and raved about the "option ARM", "pick-a-pay", or "negative amortization loan". And this week I come across a disturbing - albeit old article (8.14.08) - from The Economist.
Here are the high(low)lights of the article:
1. 1.4 million households have the "option ARM"
2. Most of them are in California
3. Delinquencies have risen from .49% in Q4 2007 to 3.91% in Q2 of 2008
4. Most payments will surge between 60-80% when the loan recasts
5. These loans account for 45% of Wachovia's portfolio (remember I said watch Wachovia)
6. These loans account for $500 billion dollars in loans
7. The majority of these loans will begin to recast in 2010 to 2011
Commentary - 2007 and 2008 were just the beginning of what is to come. I don't know if the bailout can stem the tide that is coming, but the worst is on it's way. The horizon has more foreclosures and more bank failings.
If you want - you can read the article for yourself - option ARM!
