An update on the last post about the Great Housing Crash of '08. Interest rate resets are an important factor in triggering foreclosures. Many people who took out adjustable rate mortgages at low "teaser rates" are now finding their loans reset to much higher market rates. When that happens, families fall behind on their payments.
According to First American CoreLogic LoanPerformance databases, as of February 2008, 66% of subprime ARM loans had already reset and 40% of prime ARM loans had already reset.
So another 33% of subprime loans must reset. Since these are the last subprime ARMs to reset, it's likely they were made at the very top of the housing bubble. We know lending standards were loosest at the end of the run up. It seems logical to conclude that the last loans to reset are more likely to end up in foreclosure.
