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Are Option ARMs the New Subprime Category?
New York-Payment-option mortgages, which stretched the buying power of consumers by allowing them to make minimum payments for a period of years before adjusting to a fully amortizing rate, are poised for dramatically increasing defaults, according to Fitch Ratings and other analysts.
The problem: by keeping minimum payments low for a period of time, typically five years, borrowers face not only dramatically higher monthly bills as the loans adjust but also have built up "negative amortization," meaning they owe more than they originally borrowed. Coupled with declining home prices, that left many borrowers under water on their home loans.
The potential average payment impact? Fitch says that, on average, borrowers potentially could see their monthly bill increase by $1,053 when the loans "recast." That's on top of an average existing payment of $1,672.
Roughly $29 billion of option ARMs are scheduled to recast into amortizing loans by the end of 2009. An additional $67 billion will recast in 2010. More than $200 billion of option ARM ...
- Fitch Sees Need for Criteria Tailored to Option-ARMs.
- News wire article from: Mortgage Line Dymi, Amilda February 9, 2007 700+ words
...consumer advocates. Fitch Ratings has started a...Certain product types like option ARMs need special operational...to products analyzed, Fitch said, "the increased...specialty products like option ARMs in the marketplace is...Ms. Tillwitz said, "Fitch has also included ...
- Fitch: High Defaults Await U.S. Option ARMs as Loan Recasts Approach.
- Press release article from: Business Wire September 2, 2008 700+ words
...credit may leave many option ARMs' borrowers unwilling...more expensive homes." Fitch's rating criteria and...feature. As a result, Fitch has only rated approximately...product's high risks. 'Option ARMs: It's Later Than it...then Special Reports Fitch's rating definitions...
- Fitch Sees Need for Criteria Tailored to Option-ARMs.(adjustable-rate mortgage )
- Magazine article from: Mortgage Servicing News Dymi, Amilda February 1, 2007 700+ words
...consumer advocates. Fitch Ratings has started a...Certain product types like option ARMs need special operational...to products analyzed, Fitch said, "the increased...specialty products like option ARMs in the marketplace is...Ms. Tillwitz said, "Fitch has also included ...
- Fitch Teleconference: U.S. Option ARMs, Tuesday 6/28 10 a.m. EDT.
- Press release article from: Business Wire June 20, 2005 700+ words
NEW YORK -- Fitch Ratings will discuss how the rising interest...teleconference will be archived on the Fitch Ratings web site for three months. Interested...which is located under the heading 'About Fitch' at www.fitchratings.com. Fitch...
- Fitch Teleconference: U.S. Option ARMs, Tomorrow, 6/28 10 a.m. EDT.
- Press release article from: Business Wire June 27, 2005 700+ words
NEW YORK -- Fitch Ratings will discuss how the rising interest...teleconference will be archived on the Fitch Ratings web site for three months. Interested...which is located under the heading 'About Fitch' at www.fitchratings.com. Fitch...
- Executives Giving More Details on Option ARMs: Some find tougher line of...
- Magazine article from: American Banker Shenn, Jody August 3, 2005 700+ words
...out the exact amount of option ARMs among its mortgage originations...He said only 8% of its option ARMs started with loan-to...tougher questions about option ARMs are being lobbed at lenders...Poor's Corp. and Fitch Inc., which has cut...
- Fitch: U.S. Risks of 40-, 45-, and 50-year Mortgages Vary by Product.
- Press release article from: Business Wire June 19, 2006 700+ words
...Senior Director at Fitch. 'Forty-year option ARMs have lower initial...for all of 2005. The Fitch report,'40-, 45...Year Mortgages: Option ARMs, Hybrid ARMs, and...is available on the Fitch Ratings web site at...
- Fitch: More Payment Shock May Await U.S. Option ARM Borrowers.
- Press release article from: Business Wire June 20, 2005 700+ words
...hybrid mortgage pools, according to Fitch Ratings in its revised option ARMs rating methodology report. Fitch's analysis of the option ARM product...Payment shock risk is higher for option ARMs under Fitch's cash flow stresses compared to...