Sunday, June 14, 2009

CR: Option Arms

First post in a long time... CFA exam and all that. From CR:

And here is a repeat of the most recent reset / recast chart from Credit Suisse.

Credit Suisse is using recast dates for Option ARMs and reset dates for all other loans.

As Tanta noted: "Reset" refers to a rate change. "Recast" refers to a payment change.

Resets are not a huge problem as long as interest rates stay low, but recasts could be significant. There are some questions about how the Wells Fargo pick-a-pay portfolio fits into this chart, since Wells Fargo doesn't expect significant recasts until 2012 (see A Bank Is Survived by Its Loans )

No comments:

Post a Comment