Keep in mind though that a huge portion of the IOs were done back in late 03-early 04 when the Libor was at 2.0%, or six month constant maturity treasury (CMT)was at 1.00-1.50%. So if those are resetting every six months, the debtor will be getting a steady dose of increasingly stressful monthly payments. These are pretty nasty ARMs toxic shocks in my book. I suspect the holders of these properties (many of whom are speculators) may be the ones trying to put listings on the "buyer's market" to unload? And to who, someone else that gets a six month teaser and has poor math skills? Complete idiots might be in shorter supply now, so more and more problematic. The sheer size of these loans in places like Calf adds to the stress mathematics. And if he is back in colder climes like DC metro, NJ, or Mass, he'll get a big heating bill to boot. If a Humpty is facing $34,100 in IO payments and a soft market, it doesn't take a rocket scientist to realize he's facing trouble. You can see most of the the impact has already been delivered even without readjusting to reg amortization.
Six month CMT plus 2.50 on 500k mortgage
11/14/2003: 1.05= 3.60% $18,000 annualized payment
05/14/2004: 1.34= 3.89% $19,450
11/12/2004: 2.30= 4.80% $24,000
05/13/2005: 3.18= 5.68% $28,400
11/18/2005: 4.32= 6.82% $34,100
Nov, 2006 readjustment to reg amortization on 3 year term IOs.
Assumes today's 6 CMT sticks, annual P&I would be $39,250. |
