Industry NewsMortgage

Bank fears pushing ARM rates up

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

The value of stocks traded on global exchanges has plummeted by an estimated $25 trillion this year, but the bigger worry for many analysts is the continuing fear banks have about lending money to each other. A telling indicator of those fears is the rise in the London Interbank Offered Rate, or LIBOR, which tracks the rates banks charge each other for loans in 10 currencies for durations ranging from overnight to 12 months.According to the British Banking Association, LIBOR is used to set rates for financial products such as loans that total $350 trillion worldwide. While loans between many U.S. banks are tied to the federal funds overnight rate, the increase in LIBOR has ominous implications for homeowners with adjustable-rate mortgage (ARM) loans that have reset or are soon facing resets.Nearly all subprime and alt-A adjustable-rate mortgage (ARM) loans are tied to six-month dollar LIBOR, which hit 4.4 percent today, up from 3 percent on Sept. 15. Most prime ARM loans, including tho...