Some comments on Subprime

• The catalyst for the global financial turmoil is investors coming to terms with the reality of the massive losses on their housing and mortgage-related investments. Of the approximately $2.5 trillion in subprime, Alt-A, and jumbo IO and option ARMs outstanding—equal to almost one-fourth of all mortgage debt outstanding—some $1.3 trillion is at serious risk of default (see chart). These at-risk loans were originated between late 2004 and early this year with less than 10% equity at time of origination. House prices are expected to decline 10% from their late 2005 peak to their nadir later next year. Of those at-risk loans, nearly $425 billion worth will actually default, ultimately resulting in losses to investors who purchased securities backed by those mortgages of well over $100 billion.

The above was taken from today's market wrap posted by Chris Puplava: Fragile, Handle With Care

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About them Adjustable Rate Mortages

My Dearest Moo Moo Cow,

Give this new article posted on CBS Marketwatch a GOOD read: 'Tsunami' of adjustable-rate mortgage resets coming. Scary, eh?

Here is what they are saying:

• More than $2.28 trillion worth of ARMs were originated in 2004, 2005 and 2006, at the peak of the recent housing boom, according to a study released this week by a unit of real estate data company First American.
  
  Some of these loans have already reset at higher interest rates, but a lot more have yet to reset.
  
  This year, almost $370 billion worth of first ARMs are resetting. More than $250 billion worth will reset in 2008 and 2009 and another $700 billion will do so in 2010 and beyond, the First American study estimates.
  

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