I went to your source, but they don't say where their source of data is. I am not saying I am disputing the data, it's similar enough to what else is out there to be believable. There are a few reasons to be less distressed by option arms compared to subprime resets.
Option ARMs tend to have less risky customers than subprime, in fact they are often prime customers. Option ARMs also tend to reset at lower rates and have less strings attached than subprime loans. Finally, rates are low so those resets might actually be good things depending on how things are in the future. I think that rates will likely stay low. In fact, I think this chart is a good part of the reason why the Obama administration is trying to keep rates low, so we don't get another wave of foreclosures.
But, this graph is a good representation of one of the trends I have been pointing to that will help the housing market stabilize in the not too distant future.
Option ARMs tend to have less risky customers than subprime, in fact they are often prime customers.
The greatest source of increasing default rates is now coming from PRIME customers. This is in direct relation to increasing unemployment rate, decreasing balance sheets, decreasing sources of secondary funding, and increasing debt-to-income ratios.
rates are low so those resets might actually be good things depending on how things are in the future.
Rates are not much lower, now, than where they were during the rest of this disinflationary decade.
this chart is a good part of the reason why the Obama administration is trying to keep rates low, so we don't get another wave of foreclosures.
As I mentioned above, there is already a building tide of prime defaults, so while lower rates are far better than moderately higher rates, they are not a panacea in a D-leveraging world economy.
Sure, default rates are increasing for PRIME customers due to increasing unemployment, but subprime rate changes often go from something like 3% or even lower to 12% or even higher. I mean, tons of these subprime loans had insane terms, balloon mortgages, horrible extra fees, I know that Prime customers are losing their jobs but many subprime loans were simply never sustainable from the start. You will see, there is no way the default rate for prime loans will match subprime.
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Option ARMs tend to have less risky customers than subprime, in fact they are often prime customers. Option ARMs also tend to reset at lower rates and have less strings attached than subprime loans. Finally, rates are low so those resets might actually be good things depending on how things are in the future. I think that rates will likely stay low. In fact, I think this chart is a good part of the reason why the Obama administration is trying to keep rates low, so we don't get another wave of foreclosures.
But, this graph is a good representation of one of the trends I have been pointing to that will help the housing market stabilize in the not too distant future.
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Option ARMs tend to have less risky customers than subprime, in fact they are often prime customers.
The greatest source of increasing default rates is now coming from PRIME customers. This is in direct relation to increasing unemployment rate, decreasing balance sheets, decreasing sources of secondary funding, and increasing debt-to-income ratios.
rates are low so those resets might actually be good things depending on how things are in the future.
Rates are not much lower, now, than where they were during the rest of this disinflationary decade.
this chart is a good part of the reason why the Obama administration is trying to keep rates low, so we don't get another wave of foreclosures.
As I mentioned above, there is already a building tide of prime defaults, so while lower rates are far better than moderately higher rates, they are not a panacea in a D-leveraging world economy.
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So did many Alt-As
I know that Prime customers are losing their jobs but many subprime loans were simply never sustainable from the start.
So were many Prime loans, during the bubble years (simply loans which were far too big, in relation to historical and prudent lending practices)
You will see, there is no way the default rate for prime loans will match subprime.
Doesn't have to. The economy was [chugging] along in 2006 when subprime began blowing up. Now the economy is crippled, at best.
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