Although there is still quite a bit of unwinding to take place in the sub-prime market yet to come, all the blogs I'm reading are referring to the upcoming (2010, 2011).
Credit-Suisse graph
I'm sure one of our resident mortgage brokers could explain them better, but as I understand them these are "teaser rate" loans that have about 5 years of very low interest, and negatively amortize like a zero interest loan, then after a period the rates (and paymets) pop up dramatically often tripling the payment.
Where they differ from sub-prime is these are the loans that McMansions were built/bought on. Typically a higher FICO score, gainfully employed, overzealous borrower.
Now the solution in theory would be everyone should refinance at low rates. But because of the market drops, everyone is underwater and so the banks won't loan to them. Banks are pocketing TARP funds basically prepping for the next wave to hit, probably hoping that the government will print even more money for them.
Credit-Suisse graph
I'm sure one of our resident mortgage brokers could explain them better, but as I understand them these are "teaser rate" loans that have about 5 years of very low interest, and negatively amortize like a zero interest loan, then after a period the rates (and paymets) pop up dramatically often tripling the payment.
Where they differ from sub-prime is these are the loans that McMansions were built/bought on. Typically a higher FICO score, gainfully employed, overzealous borrower.
Now the solution in theory would be everyone should refinance at low rates. But because of the market drops, everyone is underwater and so the banks won't loan to them. Banks are pocketing TARP funds basically prepping for the next wave to hit, probably hoping that the government will print even more money for them.
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