Monday, June 19, 2006
$1Trillion in ARMs Due to Reset Next Year
"ARMs are a ticking time bomb."http://biz.yahoo.com/ap/060619/foreclosure.html?.v=4
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 Foreclosure.com. And delinquency rates appear to be rising, as well.
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.