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Strategies & Market Trends : The Residential Real Estate Crash Index
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From: Schnullie4/3/2006 3:44:57 PM
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An excerpt from yesterday's LA Times.

latimes.com

Shorting FED (FirstFed) and DSL (Downey) is looking better and better. I'm also considering the Aug '06 $60 puts for DSL (they're $1.80 today).

Many lenders larger than First Federal offer option ARMs, including rival thrifts like Oakland's Golden West Financial Corp., parent of World Savings, and Downey Financial Corp. in Newport Beach. Seattle-based Washington Mutual Inc., the largest S&L by far, and Calabasas-based Countrywide Financial Corp., the nation's largest mortgage lender, have helped to popularize option ARMs across the country.

But First Federal has taken to them like few others. Of all the home loans that Washington Mutual held at the end of 2005, 52% were option ARMs, the company said in its annual report to the Securities and Exchange Commission. Golden West and Downey said more than 90% of their loans were option ARMs. At First Federal, 100% of residential mortgages were option ARMs.

First Federal executives contend that they also have more experience with this kind of mortgage and that they build in more safeguards. Those include setting aside large reserves for losses and maintaining tough standards for credit scores, debt loads, down payments and other indicators of repayment probability.
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