Friday, June 12, 2009

Mortgage Reset (And Recast) Wave Coming: Whoo, Whoo! Here Comes The Pain Train!

As a follow-up to our post yesterday that the Option ARM reset/recast wave is upon us, I thought our loyal readers may appreciate seeing an updated version of everyone's favorite graph: the monthly mortgage reset/recast chart. It shows that the pain train for ARMs and Option ARMs is just now leaving the station (yellow and light blue).

For those that were hoping yesterday's green shoots news that month over month foreclosure filings declined 6% (despite being the third biggest month for filings ever), you should take that news in the context that we are basically right between two reset humps. The first hump was the subprime reset wave which exploded during 2007 and 2008. We are now at a comparative lull (though still an absolutely high level of resets) before the pace simply explodes from the $20-25 billion a month today to $35-$40 billion a month for two years starting in Q3 2010. Don't worry though, the economy will be robust by then, personal balance sheets will have been repaired, house prices will have recovered, and this will largely be a non-event. Oh, and the Fed will keep benchmark rates low so that the then floating mortgage payments will stay manageable for the ensuing 23-25 years.

Happy green shoots to you all!

Mortgage Reset Wave

Many thanks to our friends at Credit Suisse for continuing to aggregate this data (it's basically a data dump from Loan Performance and the agencies).