Percentage of ARM mortgages now at early 2008 levels

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by Skadi793

There has been an explosion in adjustable-rate mortgages issued in the last 4 months, from 3% of all outstanding loans, to over 11%

www.cnbc.com/2022/05/11/adjustable-rate-mortgage-demand-surges-to-14-year-high-as-homebuyers-try-to-afford-this-pricey-spring-market.html

and in addition to this, more than 10% of loans are FHA/VA, which allow for credit scores as low as 580. So 20%+ of all outstanding loans can be characterized as “risky” going forward.

And they are getting packaged up into MBS

When rates rise dramatically, what is going to happen? Is the only reason the default rate is very low right now is because of the direct stimulus and student-loan payment deferrals of the last 2 years?

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Or to ask this in a different way, is Michael Bury shorting the housing market again?

Lending standards were worse before 2008 for sure. But the increase in the number of ARMs issued is concerning –these loans are going to reset at much higher rates 2-3 years from now, and if there is a big decline in home values, we are going to see foreclosures soar

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