Stage Two of the Mortgage Collapse: $500 Billion in Pay Option ARMs Meet the Piper in 2008 with 60 Percent Being in California
June 16th, 2008Via: Dr. Housing Bubble:
The next stage of the mortgage debacle is only starting to rear its ugly head and all early signs tell us that this is going to be even worse than the subprime mortgage collapse. We need to remember that the subprime mortgage debacle was only one facet of a global debt boom that has taken a stranglehold over the industrialized world. The United Kingdom is now starting to realize that even they are going to face a housing meltdown. Yet there is still a perception out there from pundits and those in the media that this housing meltdown was caused purely by subprime loans, which could not be anything further from the truth.
Many understand that this is a debt bubble and not only a collapse fueled by the subprime market in which low-income people bought overpriced homes. That in fact is a big player in this mess but many who once thought they were “prime” are going to be realizing there is nothing prime about them. Welcome to the even uglier side of things which is only in stage one at the moment. We now enter the Pay Option ARM debacle:
Pay Option ARM
The most ominous sign of the above chart is the following:
-$500 Billion in total Pay Option ARMs outstanding in the U.S.
-60 Percent of these issued to folks in California
The Pay Option ARM is one of the most poorly construed mortgage product ever to face this planet. It was a pathetic attempt to allow a larger majority of Americans to have a piece of the great American credit ponzi scheme.
