Study: Resets Won't Badly Hurt Economy

Mortgage payment resets may result in $110 billion in foreclosure losses over several years, but this would represent less than 1% of total U.S. mortgage lending during the same period and would not significantly affect the economy, according to a study by First American Real Estate Solutions.The resets -- stemming from the conversion of low, teaser interest rates on adjustable-rate loans to higher prevailing rates -- will nevertheless hurt some families and firms involved with the riskiest loans, the company said. "Mortgage payment reset is likely to be the most important issue facing mortgage servicers and investors in the nonprime market during the next few years," said George Livermore, president of the Property Information and Services Group of The First American Corp., the parent company of First American RES. "This analysis provides helpful guidance for mortgage professionals by explaining key dynamics associated with mortgage payment reset and provides a method for evaluating risk." The study, "Mortgage Payment Reset: The Rumor and the Reality," was conducted by Christopher Cagan, director of research and analytics at First American RES. The company can be found online at http://www.firstamres.com.