But option ARMs aren’t the only problem here. Traditionally amortizing ARMs have yet to reach the peak of their resets, too. Look at that great Credit Suisse chart again. It looks like resets will peak somewhere near the start of 2012.

The questions there are what will interest rates be then and how many will be adjusting up from artificially low teaser rates. If interest rates are significantly higher (and they’ve bounced off their lows recently)—look out. I just don’t know the answer to how much higher regular ARMs will reset, but I don’t think I’m going out on a limb to say the increases will be significant.

I dig that McClatchy namechecks good journalism by another publication, in this case a story by Audit favorite Mara Der Hovanesian:

In a prescient cover story on Sept. 11, 2006, Business Week magazine labeled option ARMs “nightmare mortgages” and warned that it “might be the riskiest and most complicated home loan product ever created.”

And this is excellent context:

Subprime mortgages caught the nation by surprise because of their short two-year resets to higher interest rates. Option ARMs reset over a longer horizon and thus are a slowly unfolding nightmare.

And it’s also great that McClatchy points out that we don’t know where this garbage is now:

Most were sold into a secondary market, where they were pooled with other mortgages and sold to investors as bonds or securities. The number of these loans is quantifiable, but banks aren’t required to disclose how many such loans they wrote. It’s unclear how many option ARMs remain on banks’ books and weren’t sold to investors.

Let’s close with this quote from McClatchy:

“They’re probably going to default at a rate that makes subprime look like a walk in the park,” warned Rick Sharga, senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.

Good efforts by both. “Green shoots” aside, it’s pretty obvious that the economy isn’t going to recover until the housing market bottoms out. Good luck with that.

This ride ain’t over yet. It’s good to warn the passengers.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.