David Kirkpatrick

September 22, 2009

The next shoe? Option ARM mortgages

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 5:42 pm

I’ll have to admit, this is one mortgage vehicle I’ve never heard of, and it sounds pretty bad. I thought I was ahead of the curve 0n commercial paper, but clearly the insanity at all levels of real estate are going to reverberate for quite some time.

From the first link:

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.”

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