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There is no way these loans will have losses similar to subprime...
Negative amortization means the banks are in effect, loaning more money every month to already undeerwater borrowers...
These loans are going down like... well like something that goes down spectacularly! (the titanic? interns in the white house? princess on prom night?)
going down like my friend's will to live once i get going on this topic after a few drinks.
... and, it's free and anonymous
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Defaults Rising Rapidly For 'Pick-a-Pay' Option Mortgages
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Defaults Rising Rapidly
For 'Pick-a-Pay' Option Mortgages
By RUTH SIMON
April 30, 2008
As the growth in subprime mortgage delinquencies appears to be slowing, lenders are seeing a rapid rise in defaults on a type of mortgage that gives consumers with good credit several different monthly-payment options.
These mortgages, which are sometimes known as "pick-a-pay" or payment-option mortgages but are generically called option adjustable-rate mortgages, are turning out, in some cases, to be even more caustic than subprime loans, in part because the loan balance and the monthly payments on some loans is growing even as home prices are falling.
These loans have become the focus of investigations and a spate of lawsuits by borrowers who believe they were misinformed about the mortgages' complicated structure. Losses on option ARMs could be "in some cases close to subprime" mortgage levels, according to a recent report by Citigroup.
On Tuesday, Countrywide Financial Corp. said that 9.4% of the option ARMs in its bank portfolio were at least 90 days past due, up from 5.7% at the end of December and 1% a year earlier. Countrywide also reported that it had charged off $125 million of these loans in the first quarter, compared with $35 million a quarter earlier. Bank of America Corp. said last week that it will stop making option ARMs altogether after it completes the acquisition of Countrywide Financial, which in recent years has been the largest originator of these loans.
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