The Housing Crisis, Part Two?
While it’s a beautiful afternoon here in the Windy City, the tone of the housing-related material I’m pouring over is just plain miserable. Take, for example, this excerpt from a piece that BusinessWeek’s Prashant Gopal wrote back on June 5:
The American homeowner must feel like one of those characters in an old cartoon who has just been hit by a falling piano. After dusting himself off and touching the large bump on his head, he probably doesn’t expect another piano to be dangling overhead. But he’d be wrong.
But what’s often funny in a cartoon is anything but in real life. With the subprime mortgage crisis already crippling the U.S. economy, some experts are warning that the next wave of foreclosures will begin accelerating in April, 2009. What that means is that hundreds of thousands of borrowers who took out so-called option adjustable-rate mortgages (ARMs) will begin to see their monthly payments skyrocket as they reset. About a million borrowers have option ARMs, but only a fraction have already fallen due….
According to Credit Suisse, monthly option recasts are expected to accelerate starting in April, 2009, from $5 billion to a peak of about $10 billion in January, 2010. Some of these loans have already started to recast. About 13% of option ARMs that were issued in 2006 were delinquent by 60 days by the time they were 18 months old, Credit Suisse said.
That’s it, where’s my stogie…
Source:
“The Next Real Estate Crisis”
Prashant Gopal
BusinessWeek, June 5, 2008
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