“A second tide of defaults”

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Good morning. The L.A. Times today updates the numbers on option ARMs, and they’re not pretty:

‘Numbers from industry trackers suggest that these borrowers ... are starting to create

a second tide of defaults for lenders ... ‘

More:

‘The percentage of option ARMs with payments behind by at least 60 days in California is in double digits in the Inland Empire, San Diego County, Santa Barbara County, Sacramento, Salinas and Modesto, according to data provided to The Times by mortgage researcher First American Loan Performance.’

‘It is astonishing how fast the credit deterioration has occurred,’ said Paul Miller, an analyst with Friedman, Billings, Ramsey & Co. ‘It took me and everybody else by surprise.’ Miller said Downey Financial Corp. was ‘the canary in the coal mine.’

Downey Financial probably belongs on L.A. Land’s Countrywide Investment Club list. Shares are slipping today, at $24.89, which represents a 68.5% decline from the stock’s July 2005 peak, which was $78.91.

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