Losses in the U.S. mortgage market may be the `tip of the iceberg` as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said.
Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note today. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said.
Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported.
`The large volume of subprime ARMs scheduled to reset at higher rates in '07 and '08 will pressure already-stretched borrowers,` putting more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds `could be the tipping point of a broader fallout from subprime mortgage credit deterioration,` they said.
-Bloomberg
I wouldn't be surprized if companies like LEND sank back down again!
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