I thought that Alt-A and Option-ARM borrowers went through massive shifts into fixed rates last year, no?
Some did. A lot didn’t. There are a lot of Option-ARM people who have been paying the lowest possible payment (ie, they’re neg-amort’ing the loan with this payment) and they’ve increased, not decreased, their LTV if even their home value remained constant (which we know it has not).
There are even people who, as they were finding the conventional ARM resets too much for their budgets refi’ed INTO an option-ARM. DoublePlusUngood.
As we moved further and further into the RE bubble, the option-ARM loans became the last gasp of insane debt to finish inflating the bubble.
These were mostly housing gamblers looking to flip for a profit. Doesn’t matter if their loans are shifted to 30 year fixed. They still don’t have the income to pay the mortgages because that was never the plan.
The only ones I feel for are those who recently lost their jobs and thats why they can’t pay.
But the majority of those involved in Alt-A and Option-ARM loans were using them to either buy more house than they could afford or refinanced into them to draw the fake equity out of their homes so they could go buy crap.
Alt-A and Option-ARMS were extremely popular in the house flipping ground zeros like LA, SD, Las Vegas, Pheonix, and Miami.