The Long and Winding Road (of Foreclosures) ~ market folly

Thursday, August 14, 2008

The Long and Winding Road (of Foreclosures)

Taken from Credit Suisse, we see just how long and winding the path of destruction really is. Adjustable Rate Mortgage Resets will be an ongoing source of pain for many Americans. Americans who signed up for ARM mortgages did so because of the low teaser interest rates they were receiving. And, eventually, these teaser rates revert back to much higher rates. Many Americans will not be able to afford their new mortgage rates sparking yet another round of foreclosures. This is not 'new' news by any means. But, it seems to me that some people have yet to truly grasp just how far from 'safety' we are. Keep in mind that even after these resets take place, it could take many months before the homeowners finally hit rock bottom and have to foreclose. ARM's will continue to reset in mass up until December 2011. Then factor in the many months afterwards that Americans will be defaulting on their new, higher mortgages. Sometimes I feel like I'm a "doom & gloom-er." But, then I take a step back and realize I'm just keeping it real(istic). Fun times ahead here in the United States of Foreclosure.

(click to enlarge)


Mark said...

Most will default and "walk away" even before then. See I'm giving you a silver lining. When you buy asset for X and asset value is X-20% in 3 years, even the sheep will figure out its stupid to stick around. Especially with so many getting into homes for 0 to 3% (max) down. Most at 0% in 2005/2006.

So they lose nothing really and its a rational decision to leave. Take the 1x hit on credit and circle back for that new home in 2014.

So I think this will be more concise than the chart shows since many of those getting maxxed in 2011 will be long gone.