I love Doctor Housing bubble! The data he compiles is great!
-$1 Trillion in CA mortgages are underwater & swimming in the Pacific Ocean.
-42% have Negative Equity.
-$3Trillion total in US
-$1Trillion in Alt-A (Interest Only etc.)
-$182Billion in Option Arms
*50%+ are in Cali
*$20Billion~ BOA (CW)
*$42Billion~ Wells (World)
*$40Billion~ Chase (WAMU)
Even though there were mortgage brokers that sold the option arm correctly by providing the proper education and disclosures most borrowers abused the product and did not save or invest the difference. If you haven’t been doing this start doing it NOW so you are prepared for your recast and if you can’t, get ahead of the game and do a short sale now.
While 88% have not yet recasted most borrowers are enjoying a 1% payment and a current interest rate of around 4%~ most commonly (MTA+Margin) or (LIBOR+Margin) Margin is fixed and usually ranges between 2-4%. (Review your loan docs or mortgage statement to obtain this information)
The problem lies when the option arm recasts and homeowners no longer have the OPTION of the minimum payment.
Well, I guess that wont be that big of a deal if the payment quadruples to 4%, right? 4% is a pretty low interest rate!
Oh, but wait! What about China? One would have to believe they want to start getting paid back their money by 2012, 2013 and that the LIBOR followed by the MTA will hit at least 4%.
Meaning (4%MTA+3%Margin) =7% septuple – octuple the payment!
Here is the ALT-A recasting schedule:
2009-2010 $6 Billion~/mo
2010-2011 $8 Billion~/mo
2011 $33 Billion~ /mo
“There’s No Easy Way Out There’s No Short Cut Home…”
…only a short sale
or will Lex Luthor – The Great Evil Mastermind of our time, be right?
Will someone nuke the San Andreas fault or will we have a big earthquake making California fall into the sea suddenly creating valuable beach-front property of the once barren desert? [shouting] “Miss Teschmaacher”
I don’t know which chart below is more scary…either way we are going to need superman
Tags: Real Estate Investing