Comments on: Option ARMs Come Back into Center Stage: 350,000 Active Option ARMs with over 200,000 in California. 78 Percent of Option ARMs have yet to hit Recast Dates.

By: Sherri

Sherri — Sat, 28 Aug 2010 20:31:33 +0000

you have great information and especially charts. I have an assignment to collect data or create a chart showing ARM Originations with in California counties since 2004. Can you direct me to where I can acquire this info? Or… better yet, do you have a chart that you can forward?
Thank you so much,
Sherri

By: Kid Charlemagne

Kid Charlemagne — Thu, 03 Dec 2009 19:11:13 +0000

@Jag
The ‘Reset’ is not the problem. The ‘Recast’ is. Many took out loans with negative amoratization, meaning the equity in the home is becoming more negative. They can recast on a timeline, or it can be triggerred by an event, such as debt-to-equity. (In engineering, you cannot divide by zero, but you can in voodoo banking-realty ‘math’). The recast recalculates the entire loan and you have to pay principle and interest going forward, plus anything else in the contract, because if you got one of these, you damn sure were too stupid to read the contract and have no idea what you signed.
What pulled the world back from the abyss was not the bailouts, it was changing the accounting rules from mark-to-market, back to mark-to-freaking-anything-I-want to. Now the banks are technically no longer insolvent, although we all know they really are. If housing were truly marked to undistorted market, all hell would break loose.
Derivatives are now over a quadrillion, or more than 10 times this planet’s GDP (which is a fabricated number). Honestly, when these formulas reach the end point do you believe the Fed will back-stop a quadrillion? Remember algebra and a parabolic curve? They look awesome, until they don’t. Whatever you’ve heard, a derivative is not ‘derived’ from something. It is a calculus formula: Dx/Dt, or a change in quantity x with respect to delta-time. They play the rate of change rather than the integral of accumulated value over time. The end-game is a retrace as violent as the one that got them there. As x approaches infinity, the formula begins to fail. Maddock approched infinity. There was no where else to go…

By: DG

DG — Wed, 02 Dec 2009 18:11:05 +0000

I don’t think they are being all that strict with the 125% LTV ratio for HAMP. My loan balance on my first is about 300k(another 85k on the 2nd) with a house that is worth 150k and they offered me a HAMP mod. Of course HAMP doesn’t address negative equity or my 2nd so I’m probably not going to accept it.

By: Joe

Joe — Tue, 01 Dec 2009 20:39:40 +0000

Lots of these had a reset of 110% so they are already resetting, many that I have seen had Interest only seconds behind them to 95 or 100% LTV from the original appraised value. So many of these people owe double what their homes are worth now its crazy. The good news is that buyers should have plenty of inventory to chose from coming up.

By: Mike M

Mike M — Tue, 01 Dec 2009 18:25:42 +0000

Martin Armstrong suggests the year 2033 as the bottom, with an intervening “relief rally” beginning in 2012. Happy hunting!