Monday, June 19, 2006


$1Trillion in ARMs Due to Reset Next Year

"ARMs are a ticking time bomb."

This year, more than $300 billion worth of hybrid ARMs will readjust for the first time. That number will jump to approximately $1 trillion in 2007, according to the MBA. Monthly payments will leap too, many beyond what homeowners can afford.

Last year, foreclosures hit a historical low nationwide at about 50,000. But that number has more than doubled since then, according to And delinquency rates appear to be rising, as well.

matto adds:
from Institutional Advisors latest newsletter:
According to the Mortgage Bankers Association (MBA), interest rates on $300 billion in hybrid adjustable rate mortgages will be reset this year. As market rates of interest have been going up, so will the cost of carrying a mortgage. Against an already minus savings rate, this will be interesting.

However, natural market forces will always find a way to limit excesses and these particular statistics indicate that Mother Nature is about to direct a huge amount of money from consumption into debt service.

In the meantime Moody's calculates that mortgage equity withdrawals in the first quarter amount to a sum equivalent to 8.4% (repeat, 8.4%) of personal income.


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