News, insight and some thoughts about the Sacramento-area real estate market

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May 05, 2008

What comes after subprime

Thanks to an alert capital-area reader for sending this Slate article about the range of possibilities when a lot of California's Option ARMS come due.

We aim to do a story relatively soon on this subject as it relates to the Sacramento market. We want to see if this may become a problem when trouble with subprime loans begin to slow down.

A long time ago I got statistics from First American CoreLogic, Loan Performance, that estimated about 26 percent of mortgages in El Dorado, Placer, Sacramento and Yolo counties in 2006 were Option ARMS. Loan Performance estimated that 19 percent of 2005's home loans in those counties were Option ARMS.

I have been told that most people make the minimum payment on these loans and if so, that somewhere between year three and four the loan payment triples or worse.

Everyone who got one of those loans now owes more than their home is worth. That means they could become the newest foreclosure candidates.

Of all loans these Option ARMS are considered the most dangerous, and this region has a lot of them. I have a few names from conversations over the past year of people who have them - but feel free to e-mail me if you have one and are trying to figure out what to do. We'd like to hear from you for the story.