Monday, August 10, 2009

Alt-A Bomb II

2009-08-06: Deutsche Sees 48% of All US Mortgages Underwater in 2011
August 6, 2009 4:18 PM CST

Deutsche Bank (DB: 66.83 +0.97%) believes continued declines in home values will increase the number of US mortgagors with negative equity from 14m in Q109 to 25m in Q111.

According to a report Deutsche released this week, the 25m represents a projected 48% of all US mortgages. While subprime and option adjustable-rate mortgages (ARM) are the biggest source of underwater borrowers in the current market, Deutsche said a larger percentage of prime conforming and prime jumbo borrowers will join the fray.
By 2011, Deutsche predicts 89% of option ARM borrowers will be underwater, up from 77% in 2009. The rate of underwater subprime borrowers will increase from 50% to 69%, and underwater Alt-A borrowers will increase from 49% to 66%.

1 comment:

Mike said...

I think this type of data is what scares the govt, and will force them to maintain the easy money policies for the next several years. All of the current policies have only delayed the inevitable, and will ultimately require more money printing to keep them going. That is why I think investing in gold related assets is one of the few ways to protect your wealth, as it will rise with a lower dollar. Here is a further discussion on the gold price and the government's inflationary policies.