The recent crisis in 2007-2008 started when the subprime mortgage rate resets around 2007-2008, as you can see from this chart.
Borrowers initially had lower rates to deal with. However, as the rates increase, more and more people will not be able to repay their debt. The subprime mortgage crisis is just the beginning.
Refer to the chart, look at the other adjustable rate mortgages that are due to reset soon!!!!
The Option ARM, Alt-A and Prime mortgages have yet to reset. When this happens, it will result in higher mortgage payments for millions of Americans. Millions more foreclosures are coming.
These are mortgages that are not necessarily subprime, but belongs to people who have good credit. The subprime crisis has already pushed the first group of people off the cliff, and the people with good credit are going to be the next victims.With declining home prices, people are going to find it impossible to refinance their debt.
The real estate crisis in America will last for years. The mortgage rates won't even peak until around 2011-2012 as shown by the chart. It is no wonder that people like George Soros recently remarked that the commercial real estate bubble is going to burst next, and he is looking to make some spectacular profits from this.
I cannot imagine what is going to happen. Not only does America need to grapple with these mortgage problems, it is also going to need to deal with a currency crisis.
UPDATE: Another graph here:
UPDATE: Another graph here:
Quotes from a financial times article:
"Sue Troll, credit analyst at T Rowe Price, who in 2006 forecast the subprime meltdown, describes Option ARM mortgages as “subprime on steroids with their underlying quality in many instances having been worse than subprime, despite involving higher quality borrowers”. She says approximately 80 per cent were low- or no-documentation.
Mr Tilson expects resetting Alt-A and Option ARM loans to push default rates even higher, further flooding the housing market, and putting further downward pressure on housing prices."
~~
"Sue Troll, credit analyst at T Rowe Price, who in 2006 forecast the subprime meltdown, describes Option ARM mortgages as “subprime on steroids with their underlying quality in many instances having been worse than subprime, despite involving higher quality borrowers”. She says approximately 80 per cent were low- or no-documentation.
Mr Tilson expects resetting Alt-A and Option ARM loans to push default rates even higher, further flooding the housing market, and putting further downward pressure on housing prices."
~~
No comments:
Post a Comment