Comments on: Is a Mortgage Melt-Down Around the Corner? http://www.bizzyblog.com/2007/03/07/is-the-mortgage-melt-down-around-the-corner/ The Business End of the Blogosphere Sat, 22 Nov 2008 01:57:51 +0000 http://wordpress.org/?v=2.5 By: TBlumer http://www.bizzyblog.com/2007/03/07/is-the-mortgage-melt-down-around-the-corner/#comment-110485 TBlumer Wed, 07 Mar 2007 23:18:06 +0000 http://www.bizzyblog.com/2007/03/06/is-the-mortgage-melt-down-around-the-corner/#comment-110485 #1, I've heard about those run-ups too. I'm not worried about the home-sales declines (I figure sellers are holding out as long as they can) as much as the foreclosures. Like I said, they're trying to ruin the economy.... #1, I’ve heard about those run-ups too. I’m not worried about the home-sales declines (I figure sellers are holding out as long as they can) as much as the foreclosures.

Like I said, they’re trying to ruin the economy….

]]> By: Tracy Coyle http://www.bizzyblog.com/2007/03/07/is-the-mortgage-melt-down-around-the-corner/#comment-110484 Tracy Coyle Wed, 07 Mar 2007 23:00:41 +0000 http://www.bizzyblog.com/2007/03/06/is-the-mortgage-melt-down-around-the-corner/#comment-110484 Foreclosures were up 50% last year and in our area, they are up another 70% so far this year. More than 25 lenders to the subprime market have closed their doors THIS YEAR. Things I have seen reported: Countrywide has reported a 19% default rate for loans issued in 06; Memphis had more foreclosures than home sales in 06; Phoenix has over 55,000 listings in the MLS (Chicago has a similar number but 1.5m more people); 14% decline in existing home sales; 60% decline in new housing starts; 1 trillion in ARMs resetting this year, most with a 2-3% increase in loan rates (a 2.5% increase on a 200,000 mortgage is $330 more a month; Here is a typical 3yr ARM I have been seeing: Initial rate 6.5%. Index rate 5.5 + LIBOR Initial cap 3% 6 month adjustments Max adjustments 1% 2004 Loan of 200,000 payment of $1,264 (no escrow) 2007 First adjustment LIBOR of 5.3 + 5.5 = 10.8% max adj 3% = new rate of 9.5% new payment $1,589 2007 second adjustment LIBOR of 5.4 + 5.5 = 10.9% max adj 1% = new rate of 10.5% new payment $1,724 2008 third adjustment LIBOR OF 5.5 + 5.5 = 11% max adj 1% = new rate of 11% new payment $1,790 A 41% increase in the monthly payment! I have seen index rates as high as 8.5% A trillion dollars at $250k per loan is 4 million households facing the above. How many do you think will be able to afford a 41% increase in their mortgage? Foreclosures were up 50% last year and in our area, they are up another 70% so far this year. More than 25 lenders to the subprime market have closed their doors THIS YEAR.

Things I have seen reported: Countrywide has reported a 19% default rate for loans issued in 06; Memphis had more foreclosures than home sales in 06; Phoenix has over 55,000 listings in the MLS (Chicago has a similar number but 1.5m more people); 14% decline in existing home sales; 60% decline in new housing starts; 1 trillion in ARMs resetting this year, most with a 2-3% increase in loan rates (a 2.5% increase on a 200,000 mortgage is $330 more a month;

Here is a typical 3yr ARM I have been seeing:

Initial rate 6.5%.
Index rate 5.5 + LIBOR
Initial cap 3%
6 month adjustments
Max adjustments 1%

2004 Loan of 200,000 payment of $1,264 (no escrow)
2007 First adjustment
LIBOR of 5.3 + 5.5 = 10.8% max adj 3% = new rate of 9.5%
new payment $1,589
2007 second adjustment
LIBOR of 5.4 + 5.5 = 10.9% max adj 1% = new rate of 10.5%
new payment $1,724
2008 third adjustment
LIBOR OF 5.5 + 5.5 = 11% max adj 1% = new rate of 11%
new payment $1,790

A 41% increase in the monthly payment! I have seen index rates as high as 8.5%

A trillion dollars at $250k per loan is 4 million households facing the above. How many do you think will be able to afford a 41% increase in their mortgage?

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