People likes to look back in the past year and reflect. This process of looking back (history?) should be done more often. There were alot of predication on the wire on how long or deep this recession will continue. I figure this is a good time to take a quick peek what were said in 2009.
Business Week April 2009, the article is a little bullish at the time but some it's prediecation is coming up.
the resets will begin to accelerate next spring (2010), rising from about $4 billion resetting in March 2010 to a peak of $14 billion in September 2011. The current level is about $1 billion. About $500 billion of option ARM loans are outstanding, according to the bank. "Things have gotten pushed out," says Chandrajit Bhattacharya, director in U.S. Mortgage Strategy for Credit Suisse. "Right now it looks like the big increase is probably going to be somewhere toward the middle of next year."
What BW didn't know at the time is the 1st time home buyer credit which happen to end in APRIL, hmmm maybe somebody saw the number ahead of time. So I am guessing "the man". is trying to spread-out the possible money problem?
The perfect storm?
The graph given above gives the expected interest rate resets in the coming months. Can you see the increases in the mortgage rates all the way to July 2012 after which they are seen to be coming down. This increase in interest rates spells doom for the dubious loans given in the form of Alt-As and Option Arm mortgages. Credit Suisse estimates a total of about $1000 billion worth of these to be affected by these interest rate resets. These interest rate resets translate into higher monthly mortgage payments for the loan holders and coupled with the current recessionary trends of job cuts and retrenchment, one can hardly expect all of these obligations to be fulfilled. Increasing job losses and low prices in the real estate markets should see a lot many defaults, a trend that has already begun. As of February job loss rat is 9.7 , for update you can see web site.
The outcome of all these unsecuritized lending sprees and now the interest rate resets is that, the second wave of the housing crisis is predicted to go well into the year 2012, is estimated to peak at higher heights and is forecast to last twice as long as the first wave.
Let's fast forward to February 2010 Credit Susse (reported by SNL)
Most of the resets are expected to occur through 2012. Between 2010 and 2012, the chart indicates that $253.25 billion of option ARMs will adjust, while Alt-A loans totaling $163.71 billion will reset over that time. Altogether, $1.010 trillion worth of ARMs will reset or recast during the three-year period.
Update: February 2010 I found a few great graph from SNL.
