Mortgage Securities Backed by ARMs, Negative Amortization May Begin to Falter, S&P Predicts
May 19, 2006
With home prices overvalued nationally, a rise in short-term interest rates could lead to problems on speculative-grade residential MBS, according to a new Standard & Poor’s analysis. “Home prices are currently about 20 percent overvalued nationally, compared with their historical ratio to income,” S&P said. The company found that home prices in the Northeast and West Coast are overvalued by 30 percent and only about 10 percent too high in the rest of the country. …