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Homeowners who 'strategically default' on loans a growing problem
Members of this forum called this in Nov-Dec last year.
Homeowners who 'strategically default' on loans a growing problem -- latimes.com
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275 kph
Re: Homeowners who 'strategically default' on loans a growing pro
The next big problem is going to be the Alt-A and option-arm loans, MANY of which will be resetting to new interest rates in 2010 (and 2011-2012).
In sheer numbers, Alt-A and option-arm loan resets could make sub-prime loan resets seem like a small blip on the economic radar...
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Re: Homeowners who 'strategically default' on loans a growing pro
So when are these junk loans going to be through the system?
I mean anything originated this year and last is pretty solid, the banks are simply looking for reasons not to lend these days. Anything in 07 should be decent at least.
The problem is the west coast and places like AZ. They now have houses that people paid $300k for that are currantly worth $80k. We didn't have crazy run ups like that. If I was in that situation I would suck all the cash I possible could out of my old house and buy the one down the street in my moms name or something, than wait 90 days and go bankrupt or default on the first.
275 kph
Re: Homeowners who 'strategically default' on loans a growing pro
Well, the ones from 2003-2007 won't be completely through the system for about 25 years...at least for those who got 30 year mortgages and are still paying...Originally Posted by hatterasguy
Though, the bulk of the damage being done by those loans will be through the system in 2011-2012, when the most alt-a and option-arms reset. Here is some more info, with a nice pretty graph:
Alt-A and Option ARM Economic Disaster Update: California Solution? Workout 3,430 Alt-A loans in March. Good Job. All we have is an additional 643,000 Alt-A Loans in the State. At this Rate it will take us 15 years to Modify or Alter all Alt-A Loans.
On top of that, FHA loans have gone from 3% of the loan origination market three years ago to over 25% now. So, if FHA borrowers ever start to default -- and they will if the economy doesn't improve drastically over the next few years -- there will be another waive of defaults with FHA borrowers (in my opinion).
Like I said earlier, I have a feeling that the housing crisis will continue in a cyclical fashion with worsening results until the underlying problems are fixed or the economy collapses.
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