Don’t forget the 2 years of ARM and other resets coming.

quote:
Shirley Breitmaier’s mortgage payment started out at $98 when she refinanced her three-bedroom home in Galt, California, in 2007. The 73-year-old widow may see it jump to $3,500 a month in two years.

http://www.financialarmageddon.com/2009/06/no-rest-for-the-red-ink-weary.html
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That is what we are facing for the next 2 years. That woman’s payment on a $315,000 loan was $98. It was 3/8 of one percent. All the unpaid part was added to the Principle and the loan would cap at 145% at which time she would have to make full payments which could be for her $3,400 higher.

58% of the option ARM resets are in California, 10% in Florida, 3% each in Az. and Nv. and the remaining 25% spread out over the other states. California, however, is 13% of U.S. GDP and this is going to really hurt that State’s chance of controlling their $24 billion deficit which I believe is projected to grow to $40 billion before this crisis ends.

We are in a quiet period where the subprime are about out of the system and these resets are ahead of us. Trying accurately predict the impact of them would be very difficult if even possible but, it will be bad for a couple of years. If interest rates on the resets is rising due to the FED not keeping long bonds low enough, then it will be worse.

The CBO projects deficits in 2019 will be as high as in 2010 and that means over $1 trillion and yet, there isn’t that much money available to lend us. The CBO also projects that during that time, interest on debt will quadruple and that is probably very optimistic due to the amount of roll overs to shorter term debt going on that will reset every 3 months to 2 years when rate start rising.

Watch the bond markets. If the yields are going up, we are going to have problems with more than these mortgage resets.

Related Posts:

• Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt.
• Tonight on Asian news they were calling for a correction in gold to reach $870 before taking off to $1,200 later this year or next.
• Any rise in interest rates will speed up the collapse.
• The economy is collapsing in the US and globally deeper into malaise everywhere.
• We will see–if there is ever a balanced budget.

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