Just in case you think we’ve seen the worst of mortgages being reset at higher rates, check out this chart, cited by the International Monetary Fund in its October 2007 Global Financial Stability Report (GFSR). After a trough in the pace of resets next year, resets shoot up again in 2010 and 2011. And the volume of resets for Alt-A and option ARMs equals that of the subprime resets we’ve already seen. (The chart is on page 8, in case you don’t feel like wading through all of the report’s 179 pages.)
The IMF’s most recent GFSR (October 2008) doesn’t include an update of that chart. It does, however, estimate that “with default rates yet to peak and the recent heightened market distress, declared losses on U.S. loans and securitized assets are likely to increase to $1.4 trillion.” That estimate is significantly higher than the IMF’s forecast six months earlier. Let the refinancings begin!
The GFSR is a wealth of information about the global economy. However, it’s not good bedtime reading if you like sleeping soundly.
Filed under: Finance, Miscellaneous | Tagged: Alt-A, Global Financial Stability Report, IMF, mortgages, option ARM, reset
