My friend, Jon Lansner, is a business columnist at the Orange County Register. He’s been blogging about exotic mortgages lately – -by exotic I mean either interest-only or negative amortization loans like pay-option ARMs (adjustable rate mortgages).
The OC Register did an analysis of exotic mortgages and looked at the default rates. Jon ran them down recently in his blog. Check it out here: http://blogs.ocregister.com/lansner/archives/2006/09/exotic_borrowers_faring_well_1.html
And the numbers say …..
What the numbers appear to say is that other kinds of loans have a higher default rate than exotic mortgages. But I think Jon’s commentators have it right. Most exotic mortgages that were done in the past two years haven’t converted yet. People are missing more payments, but when these loans convert, there’s going to be real trouble.
Mortgage lenders are running for cover. They’ve introduced pay-option ARMs that are fixed for 5 years or more. Then again, the same people recently introduced the 50-year mortgage.
Sept. 18, 2006