The looming ARMageddon

(via CJR's Ryan Chittum)

We keep hearing it and hearing it, that we're doing better now - the economy is rebounding.

But there's that other datastream that keeps *ahem* raining on the parade - the one about "another monster wave of foreclosures coming, this one driven by resets of adjustable-rate mortgages, especially so-called option ARMs."

Here's Chittum:

Option ARMs are particularly dangerous because they backload the debt, allowing buyers to pay much lower payment in the early years of the note than if it were amortized like a standard thirty-year mortgage. In the case of negative amortization notes, borrowers don’t even have to cover the interest on the note in the early years, meaning the size of the note actually increases as the months and years go by.

and

More evidence that the state of California is just screwed: 

California accounted for 58 percent of option ARMs, according to a report by T2 Partners LLC, citing data from Amherst Securities and Loan Performance.

The McClatchy article Chittum closes with is full of quotes that give you the heeby-jeebies.

Ick.