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$134 Billion Loans Set To Recast in the next 24 months

January 24, 2010

For me and my clients, it seems like we have passed through the eye of the financial tornado. Now the question everyone is asking is “will there be a second wave”.

I know it feels like we have been in this wreckage for MANY YEARS but it has only been 2.5 – which means that those 5 year teaser arms are still out there and the due date time bomb is still ticking.

Here is a great overview of the next possible wave of foreclosures:


The Option ARM Hitch

Consider this: $134 billion of option ARMs will recast over the next two years, according to Fitch Ratings. Of the $189 billion securitized option ARM loans still outstanding, 88 percent have not yet experienced a recast event. And of these 88 percent, Fitch found that 94 percent employed the minimum monthly payment strategy, which allows negative amortization. With rates set to rise in 2010, are option ARMs the next wave to squeeze ailing U.S. housing markets?

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