Sacramento: 80 percent of the subprime resets are through, here come the option ARMs
March 25th, 2009 Categories: Graphs and Charts, Mortgage and Loans, Pre Foreclosures, Real Estate News, Real Estate Trends, Sacramento Home Buyers, Sacramento Real Estate
Leslie Appleton-Young, chief economist of the California Association of Realtors, said a couple weeks ago that the subprime loans that triggered the housing slump and global economic downturn has largely run its course in the Sacramento region.
But now, the next round of problem mortgages; the Pay Option ARM, Alt-A, Neg-Am, are imploding, and they are the big ones! Most of these were very expensive, big jumbo houses.
Thousands of those loans are going to cause problems for Sacramento-area borrowers, experts say. $750 billion of option ARMs were originated from 2004 to 2007 with most of them in California and Florida.
These loans are blowing up just like the subprimes.
As of December of 2008, an amazing 28% of option ARMs were late or in foreclosure.The problem is that option ARMs were prime products because they were made to people with with higher credit scores. Never mind the fact they made no where near enough money to afford the home they were buying! Once the loan resets, the game is over!
The average increase in payment is over $1000 per month! And almost 60% of these homes are under water, or are not worth the underlying debt!
As you can see, the longer the lock on the original payment, the higher the reset
We could see this problem around until 2015 or so.