I smell a systemic meltdown... Someone wake up Neil Bush and Charlie Keating...
From Barron's ("The No-Money-Down-Disaster", by Lon Witter, Aug. 19, 2006):
"The following figures are from Washington Mutual's annual report: At the end of 2003, 1% of WaMu's option ARMS were in negative amortization ... At the end of 2004, the percentage jumped to 21%.
At the end of 2005, the percentage jumped again to 47%. By value of the loans, the percentage was 55%.
Every month, these borrower's debt increases; most of them probably don't know it. There is no strict disclosure requirement for negative amortization.
This financial system cannot work; houses are not credit cards. But WaMu's situation is the norm, not the exception. The financial rules encourage lenders to play this aggressive game by allowing them to book negative amortization as earnings. In January-March 2005, WaMu booked $25 million of negative amortization as earnings; in the same period for 2006 the number was $203 million."
August 29, 2006
One day we'll look back on this and say "what were they thinking?" The negative-ammortization timebomb (and WaMu bubble trouble)
Posted by blogger at 8/29/2006