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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (93924)	11/6/2007 10:15:18 AM
From: Think4Yourself	Read Replies (1) \| Respond to of 306849

Here is my logic: The initial reset is the shock for these borrowers. They are going from a teaser rate to above market rates, which is often a doubling in their monthly payments. That will instantly decapitate the ones who were foolish to take out those loans. As for additional resets, they are likely to be DOWN from the initial reset (notwithstanding current LIBOR activity) because the fed is cutting rates now. Anyone who doesn't refinance and survives the initial reset is likely to do better on subsequent resets. Most of the ones who will end up in foreclosure will not survive the initial reset for more than a short time. The sheer magnitude of the increase in payments will quickly overwhelm them. Anyone who can refinance when their ARM resets, will. The reason I am so concerned about the subprime ARM's is because those borrowers will NOT be able to refinance. Current fixed rate loans almost always require 20% down right now and most subprime borrowers will not be able to come up with that. ALT-A and prime borrowers are much more likely to have that between home equity and access to other funds. What am I missing? If my thinking is wrong I definitely want to know.