Richard L. Tracy Jr., president of Campbell Mortgage, a brokerage firm in West Haven, Conn., that specializes in F.H.A. loans, said many of those with poor credit who received "exploding ARMs" — loans whose rates rise sharply after two or three years — probably should not have qualified for loans in the first place, he said.
The Fed's moves have even done something to ease the pain for subprime borrowers with exploding mortgages — loans with teaser rates that vanish after two or three years.
What is new this time, and could bring much greater pain and more selling pressure in many markets, is the existence of "exploding mortgages," loans with monthly payments that will rise sharply within a year or two.
In 2006, two out of five first-time home buyers in California put no money down, relying on a variety of "loan products" whose nicknames foretold trouble, at least in retrospect: "liar loans"; "piggyback loans"; "neg am loans"; "Ninja loans" (No Income, No Job or Assets); and "exploding" or "suicide" loans.
But in the loud, overcrowded hall, the misery of subprime loans, exploding adjustable rate mortgages and slumping sales meant one thing: opportunity.
HSBC resisted some of the worst innovations, sticking mostly to fixed-rate mortgages rather than negative amortization loans with exploding interest rates.
Millions of hard-working families have seen their mortgage payments rise to 40 or even 50% of their monthly income particularly those who received subprime and exotic loans with exploding terms and hidden fees.
Savings were drained and debt of every imaginable kind — from credit cards to mortgages to student loans — exploded.
As the market heated up in the middle of the decade, the volume of securitized loans exploded — to $200 billion a year in the period from 2005 to 2007, from $70 billion a year in the 2000-to-2004 period, according to Green Street.
