Monday, March 17, 2008

Reset LIBOR Rate for Subprime ARMs Falls By 3%

From the Mortgage Bankers Association latest report on Delinquencies and Foreclosures:

"Of significance is that the rate reset issue on adjustable rate mortgages is becoming less of an issue. The 6-month LIBOR rate, the index rate used for many subprime ARMs, has come down around 2.5 percentage points since last September, greatly reducing the payment shock on many ARM resets."

Actually, since last August when 6-month LIBOR was 5.53%, the latest rate of 2.67% indicates that the reset rate for subprime ARMs has fallen by 2.86% in the last six months (see chart above), which is some rare good news for the subprime mortgage market.


At 3/17/2008 12:04 PM, Anonymous said...

What a sly fox you are. Keep the faith that there is no recession all the way through the recession and then, when it's over, you can say "See? told you there was no recession."


At 3/17/2008 2:02 PM, Anonymous Anonymous said...


I am afraid that you are missing the point. It is not subprime that is driving the liquidity crisis. Subprime is just a minor footnote in a larger drama involving mortgage backed securities and the extent to which financial institutions have become leveraged.

Evidence that the market is starting to work through deleveraging and correct itself are good news that a complete financial collapse will be averted thanks to the efforts of the central bank to provide liquidity. Next to this prospect, a recession looks like a Sunday school picnic.


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