[eXpat]

Embrace youselves , next wave is coming!
U.S. "option" mortgages to explode, officials warn

WASHINGTON (Reuters) - The federal government and states are girding themselves for the next foreclosure crisis in the country's housing downturn: payment option adjustable rate mortgages that are beginning to reset.

"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.

"That's the next round of potential foreclosures in our country," he said.

Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.

In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.

"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."

http://www.reuters.com/article/ousivMolt/idUSTRE58G5U320090917
Is going to be rich to refresh some cornucopian´s green shoots comments in a few months

[Cog]

Counting Option Arms, Alt A, and interest only (WTF!!) mortgage loans we are looking at around a trillion dollars worth of very toxic debt that will have to be dealt with over the next few years. This is not going to end particularly well. I also saw a report that prime mortgage loans are starting to default in increasing numbers. Not surprising given the employment picture.

[eXpat]

New wave of mortgage foreclosures may be coming

Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb.

"They're probably going to default at a rate that makes subprime look like a walk in the park," warned Rick Sharga, senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.

Option ARMs have triggers that reset to a new interest rate based on either a set time frame or when debt exceeds some cap above the loan's value. The spring drop in interest rates allowed many borrowers to escape a day of reckoning because the lower rates prevented a triggering of that cap.

That just postponed the problem, however, because most option ARMs have five-year automatic trigger dates. These loans were most prevalent in states such as California, Florida and Nevada, where home prices have sunk so far that many homeowners are underwater: They owe more than their homes are worth.

The bulk of outstanding option ARMs -- a product no longer available to homebuyers -- were issued between 2004 and 2007. Monthly payments on these mortgages are due to reset to a higher lending rate between 2009 and 2012.

"They're going to have a loan they cannot afford on a house that's probably way underwater and not have a lot of good options on how to avoid foreclosure proceedings," Sharga said.

While a smaller number than subprime mortgages, option ARMs grew from 3 percent of all mortgages bundled and sold to investors in 2004 to 14 percent by 2007.

They pose risks for the broader U.S. economy because they threaten to add inventory to a depressed housing market and could hasten the blistering pace of foreclosure filings -- more than 1 million from March to May alone.

"We can't rebuild housing values when there's a serious risk that another set of mortgages is collapsing," said Elizabeth Warren, a Harvard University law professor who heads a government panel overseeing the spending of Wall Street bailout money.

http://www.kfor.com/marketplace/realestate/sns-more-mortgage-foreclosures-coming,0,5167516.story

[lowem]

Ah, next downleg coming, second L and all. But if all the MSM picks up on this one I mighthave to re-think it, just from a contrarian point of view.

[Pops]

Saw a story on the morning network news...

[crude_intentions]

Between now and 2012 is going to be some pretty interesting times.

[VMarcHart]

Just looking from the other POV, isn't it a lot of funds available in the TARP bill for these upcoming toxic asset defaults? I mean, aren't we ready for it?

Thanks.

[ColossalContrarian]

Between now and 2012 is going to be some pretty interesting times.

Check out all the green shoots in that chart!!!

[jupiters_release]

Just looking from the other POV, isn't it a lot of funds available in the TARP bill for these upcoming toxic asset defaults? I mean, aren't we ready for it?

Thanks.

Good call. The Fed did pledge a $24 trillion bail out line to the banks so that should cover all the coming foreclosures. I have faith in infinite debt growth now.

[Cloud9]

In as much as the last series of bail outs increased our personal wealth by two trillion, does this mean that our personal wealth will grow by twenty four trillion? I feel richer already!