Relevant:
- 78 Percent of Option ARMs have yet to hit Recast Dates
- Wachovia to Borrower- “Are You Sure You Understand the Pay Option ARM?â€
- WaMu Nixes Option ARMs, Adds $1 Billion to Borrower Assistance Fund
- LIBOR Spike Not Only Hurts Suprime…Pay Options, Jumbo Prime, Alt-A Too
- More on the Emerging Pay Option and Alt A Fiasco
2008-09-03 — blogspot.com
Declining treasury yields will bail out some subprime borrowers, but not Alt-A Pay Option Arms. 80 percent of pay option arm holders make only the minimum payment. That is all they can afford (if they can even afford that). The time bomb is negative amortization, and that time bomb goes off when negative amortization hits contract levels (typically 110% percent but as high as 125%).
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