Option ARM Loss Severity to Reach 60-70%; Other Foreclosure and Loss Forecasts.

Housing Wire story HERE includes that projection and other foreclosure/loss projections.

Story says that Wells Fargo projects that:
Existing home sales excluding foreclosures are likely to cap at around 3m units annually. foreclosure sales are likely to contribute 1m transactions to total sales, with a peak in foreclosure rates likely to occur in mid- to late-2010 between 1.8m and 2m units. “Overall, our forecast implies a total of 7.2 million foreclosure units by 2014,” researchers wrote. “Although the foreclosure inventory will likely dampen home price appreciation, we believe most of the home price damage due to foreclosure inventory is done and that home prices will likely remain stable over the period.”

In light of the projections, Wells Fargo revised its loss estimates on various credit sectors. Wells Fargo researchers expect cumulative losses on prime ARMs to range from 2% among ‘04 vintages to 6% among ‘07 vintages. Cumulative losses should range between 6% and 11% among Alt-A/B ARMs and between 11% and 36% among subprime ARMs.

Originally created and posted on the Oregon Housing Blog.