“The avoidable scenario is interest rates start to go up over the next couple of years, and all of a sudden, millions of homeowners who are stuck in adjustable rate mortgages and haven’t been able to refinance out of them become sitting ducks for big payment increases,” McBride said. “And then here we go again. It’s like 2007 all over again. And again, the HARP program is key to avoiding that iceberg, and we’re headed right for that iceberg, and no one’s turning the wheel because everyone’s focused on mortgage modifications.”
Yet Bhattacharya said the ARM reset chart does not portend the all-out doom some housing bears infer. For one, option ARMs are concentrated in just a few states. A Fitch Ratings study from Sept. 8, 2009, reported that three-quarters of all option ARMs were in California, Florida, Nevada and Arizona.
Likewise, McBride was cool to the idea that option ARMs could flood the foreclosure rolls.
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A ton of this shit is Pay Option Arms. The loans, which we high LTV when the market was good, are not 10-15% higer due to negative amoritization. This will really shake the hell out of the forclosure market…or hell, whats another tril?