[This is from the Washington branch of ISI, the entity run by Wall Street's fave economist, Ed Hyman.]
INVESTORS CHEER UNCLE SAM RIDING TO THE RESCUE, THEN RECONSIDER
<snip>
It is a myth that rate resets have been driving the subprime delinquencies. In fact, the vast majority of subprime mortgages that are delinquent are still paying below-market teaser rates and have not reset. It is not the interest rate that is burying these borrowers.
Instead, it is the fact that even with a low rate they are paying close to half of the gross incomes on their mortgage payment.
What's more, nearly half of them made up their incomes, so their true debt-to-income is actually much higher.
[...]
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I'm inspired to point out that this is almost precisely what Jordan stated months ago during a pre 'subprime-a-geddon' discussion.
That is, (paraphrasing now) 'people facing foreclosure are often pressed to the wall by larger personal financial issues and not by resetting rates alone.'
The point being that buying a house, even using tricky ARM instruments, is not always the oil slicked, downward sloping road to hell some of our most cantankerously enthusiastic list members seem to think.
As I recall, this became (yet another) point of contention.
.d.