About 1.1 million homeowners will lose their homes to foreclosure because of a mortgage resetting to a higher rate over the next six to seven years, said Christopher L. Cagan, director for research and analytics at First American CoreLogic, a mortgage industry research firm in Santa Ana, Calif.
studied two databases with information on 58 million mortgages and sees a wave of mortgage resets moving through the system, first the mortgages with low teaser rates, followed by subprime loans and finally, as the decade comes to a close, the loans to homeowners with good credit.
This pig-through-the-python transition is not enough to hurt the overall economy ‹ about $112 billion will be lost, he
calculated ‹ but it is a world of pain for the households involved.
Almost all of the teaser loans issued this decade ‹ those mortgages offered for less than 3 percent ‹ have reset in the last two years.
Rates for most of the homeowners with good credit who obtained adjustable-rate mortgages during the boom years of the housing market will reset from 2008 to 2010.
thought only 7 percent of these loans would default because of the reset.
concluded that ³2008 is the pinch year.² If he
were a gambling man ‹ or a real estate investor, but really, what¹s the difference? ‹ he
would start buying residential properties in 2009.
The bulk of the subprime adjustable-rate mortgages, those made to people with less-than-sterling credit reports, are resetting this year and next.
About 12 percent of the subprime mortgages will default, he
Multiply 50 percent times 26 percent and you reach the sad fact that the person has to pay 13 percent more of income to cover the mortgage. ³At 50 percent of your income there is not that much you can cut,² Mr. Cagan
Mr. Cagan, the researcher at First American CoreLogic, found that if house prices went up 1 percent nationally, 70,000 fewer loans would foreclose because of resets.
Of course, the opposite is true as well, he