Option ARMs in Financial Pain: 900,000 Mortgages and 1 out of 4 either Seriously Delinquent or in Foreclosure

It is interesting to see new data being published regarding Option ARMs in the new OCC and OTS report. According to the recently released report, there were 900,000 active Payment Option ARMs in the United States. What is troubling about the current report is the performance of these loans. Many of these loans are located in the depressed states of California and Florida that have dealt with record breaking budget problems. These loans have the potential to once again destabilize the housing markets in these regions.

What is interesting to note about this report is that 1 out of 4 of the option ARMs are either in foreclosure or in serious delinquency. The vast majority of these loans will not hit recast dates until 2010 yet the performance of these loans is already disastrous. The difference between a recast and a reset is that a recast is a change in payment irrespective of a low interest rate. Let us first look at their geographic location: (more)