So what happens when the option ARMs start resetting?

[midnight armadillo]

The outstanding amount of option ARMs is actually greater than the subprime ARMs whose re-set interest rates triggered the wave of foreclosures and meltdown of the housing market, followed by the collapse of Wall St.

Note this graph:

Here we see Option ARMs interest rates re-setting starting in 2009 and peaking around 2011. Now check out the revised schedule that's being passed around the web...

That's right - there's more bad money out there in option ARM loans than there is in subprime, and the option ARM shitstorm starts in '09.

I don't own a house but I hope to buy one in 2009. Will there be any banks left to grant mortgages? I don't know!

[Infomaniac]

1. Good Question

I think the fallout is just beginning.

[Warpy]

2. That's happening through 2009 and into early 2010

if anybody's interested. Either the banks are going to have to get on the stick and renegotiate those stinkers, or a lot of folks will be out on the street while a lot more banks are joining Lehman Bros. on the scrap heap of finance.

[MichiganVote]

3. We bought our 1st house on a LC b/c interest rates were horrible.

later refinanced. 2nd house worth more money, much lower interest. Not going anywhere now but if I had expendable cash I'd buy property now. But I expect property taxes to rise in local communities.

[flvegan]

4. Depends on the brilliance of the lenders and borrowers.

See, foreclosing on a house is a loss-leader. Every lender foreclosing on a house that has made at least an 80/20 loan in the last 5 years is going to take a bath.

Lenders, please...default resolution. Modify those mortgages.

Borrowers, this isn't a time to try to save money. If your loan is resetting from a low fixed to a points plus rate, call your lender and offer to extend the original term of your fixed for another two years. Refi's aren't happening with declining values, especially if your credit took a hit because you defaulted on a car loan or credit card. Lender keeps their superior loan position are in the same exact performing loan position they were in. Matter of fact, they're better than getting that cash back from a refi because they've got a good loan at a higher rate, plus, they aren't carrying interest payments and liens from the locals because the grass isn't mowed and someone ripped the doors and windows out. It's a performing friggin loan, people!

Can someone please make me CEO of some stupid big lender that doesn't get it? I'll make you famous.