Pedro222

Alt-A Loans Spiraling Downward

A significant number of the Option ARMs have a provision for a reset if an LTV (based on original value) cap is reached; which happens if only the minimum monthly (negatively amortizing) payment is made. Most people ended up only making these minimum payments. I don't think this effect is fully captured in the CS chart you have, and as a result we may be seeing far more "Alt-A" (in the broader -Fitch- sense) resets than anticipated.