Defusing the Option ARM Time Bomb audio conference
An Inside Mortgage Finance Audio Conference
Held Wednesday, December 16, 2009
Did you miss the Option ARM Audio Conference?
Option ARMs are facing increased scrutiny from regulators who warn that the mortgages are “ticking time bombs.” California Attorney General Edmund Brown and the House Oversight and Government Reform Committee recently sent separate letters to option ARM servicers in an effort to increase loss mitigation on the mortgages.
Find out how big a problem option ARM resets are likely to be and what should be done with these loans at a new IMF audio conference. Today increased charges of unfair and deceptive trade practices are threatening lenders, with claims on the rise, and more than 40 option ARM lawsuits pending.
Analysts at FBR Capital Markets estimate that $500 billion in option ARMs are outstanding, with roughly $150 billion expected to reset in the next two years. Few option ARMs have been modified and now servicers are being asked to provide detailed plans of action. According to analysts at Deutsche Bank, nearly 40% of outstanding option ARMs are 60+ days delinquent, and more than 77 percent of option ARMs have negative equity.
Is HAMP appropriate for negative equity loans? Or is restoring equity through a refinance the best way to assist homeowners?
These Experts Shared Their Insights and Answered Questions:
- Laurie Goodman, Senior Managing Director, Amherst Securities
- Paul Miller, Lead Analyst, FBR Capital Markets
- Jennifer Woodbury, Senior Pricing Analyst, Standard & Poor’s
- Terry Couto, Partner, Newbold Advisors
- Guy Cecala, Publisher, Inside Mortgage Finance (moderator)
Topics for This 90-minute Session Included:
- The scope of the option ARM problem.
- Is the HAMP program a suitable fix for some option ARMs?
- The effect that continued low interest rates would have on losses.
- Best practices in servicing option ARMs.
- The basis for claims of unfair and deceptive trade practices.
- Refinancing alternatives for option-ARM borrowers.
- Typical repayment shocks.
- Loan mod approaches: term extension, conversion to interest-only loans and reduced interest rates—what about principal forebearance?
- How detailed must the plans to help borrowers be that servicers lay out for the government.
- Investor issues and expectations with option ARMs.