*a few things of note here: credit worthy borrowers heavily sold this (but realistically we are finding that borrowers had not been credit worthy either they had too many refi's or broker lied about income levels), falling at a much faster rate than subprime, more of it sold across the country than you are being told. For those of you who think I am wrong about where the future of the market is going, guess again. Eventually, we are all subprime, if only because Fannie and Freddie will likely take over the mortgage market once and for all and this will be VERY BAD for american taxpayers but FABULOUS for banks. Still wonder who's running our country?
By MARSHALL ECKBLAD
For the third straight month, option adjustable-rate mortgages are generating proportionally more delinquencies and foreclosures than subprime mortgages, the scourge of the U.S.
Option ARMs were typically issued to creditworthy homeowners and allow borrowers to make a range of monthly payments. The payment options include a partial-interest payment that adds the unpaid interest to the loan's balance. On many such loans, balances have risen while values of the underlying properties have plummeted amid the housing crisis.
As of April, 36.9% of Pick-A-Pay loans were at least 60 days past due, while 19% were in foreclosure, according to data from First American CoreLogic, a unit of Santa Ana, Calif.-based First American Corp. In contrast, 33.9% of subprime loans were delinquent, with 14.5% of those loans in foreclosure, the figures show.
Payment-option mortgages are heavily concentrated in the worst-hit regions in the housing market, including California and Florida, making borrowers inordinately vulnerable to declining property values. The deepening loan turmoil could mean higher-than-expected losses for Wells Fargo & Co., J.P. Morgan Chase & Co. and the Federal Deposit Insurance Corp.'s own. wsj.com
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