The Housing Chronicles Blog: 60 Minutes covers upcoming Alt-A and Option ARM foreclosure wave

Sunday, December 14, 2008

60 Minutes covers upcoming Alt-A and Option ARM foreclosure wave

Tonight 60 Minutes covered the upcoming wave of potential foreclosures related to Option ARM and Alt-A loans, which are expected to start rising over the next three years, with as many as 8 million homeowners losing their homes. Already 10% of outstanding mortgages are in technical default:


Watch CBS Videos Online

2 comments:

Anonymous said...

CBS missed a very important fact. An NASE Survey at www.nase.org , found that 3.7 million small business owners are part of this Toxic mortgage problem. They were targeted for ALT-A and Option ARMs. In fact, by mid-November 1.3 million have already missed 1-3 or more payments, and this is before the RESETS due to begin in 2009. The key to a solution is getting to these small business owners. Remember, these businesses employ 1-10 employees. If they fail, we have a major problem with job losses.

8n0u7 said...

They also seemed to gloss over the main problem with the option-arm loans as I understand it. The big problem is not that the interest rates recast after 5 years, it's that the entire loan recasts.

The teaser rate going up is a small portion of the real issue. The recast means that the loan changes from an interest only or negatively amortized loan to a fully amortized loan at a legitimate rate for the remaining 25 years so the lowering of the interest rate will do nothing for these people--especially if the borrower paid the minimum payment on a negatively amortized option-arm for the first five years. Those who did, have a larger principle than they originally borrowed on a house that's worth half as much as they payed for it.

That's the way I understand it, at least. Maybe I'm ill informed, but I don't believe I am.