Another wave of foreclosures looms!
WASHINGTON - September 9, 2009 - The housing market faces the prospect of a new round of foreclosures as hundreds of thousands of risky home loans known as option adjustable-rate mortgages (ARMs) reset to significantly higher payments that could force borrowers to fall behind, according to a report released Tuesday by Fitch Ratings.
About 70% of the $189 billion in outstanding option ARMs will reset by 2011, the report said, which would be another setback to a teetering housing market still struggling to recover from the mortgage meltdown that precipitated the financial crisis.
Option ARMs make up only 1.3% of percent of outstanding mortgages and were used by a far smaller segment of the population than subprime mortgages, according to First American CoreLogic, so the fallout from the resets should not be as devastating. But the unraveling of the option ARMs could be felt for years.
"It does tell you there's going to be continued front-page news about high levels of foreclosures as these loans continue to struggle," said Paul Miller, an analyst at FBR Capital Markets.
About 70% of the $189 billion in outstanding option ARMs will reset by 2011, the report said, which would be another setback to a teetering housing market still struggling to recover from the mortgage meltdown that precipitated the financial crisis.
Option ARMs make up only 1.3% of percent of outstanding mortgages and were used by a far smaller segment of the population than subprime mortgages, according to First American CoreLogic, so the fallout from the resets should not be as devastating. But the unraveling of the option ARMs could be felt for years.
"It does tell you there's going to be continued front-page news about high levels of foreclosures as these loans continue to struggle," said Paul Miller, an analyst at FBR Capital Markets.
