SANTA ANA, CA ? First American Real Estate Solutions; the nation's largest provider of advanced property and ownership information, analytics and services, released a new study today that investigates the impact of mortgage payment reset by providing insight into who will be most affected when adjustable-rate loans convert from low, teaser interest rates to higher prevailing mortgage market rates.

Titled "Mortgage Payment Reset: The Rumor and the Reality," by Christopher Cagan, Ph.D., director of research and analytics at First American Real Estate Solutions, the study utilizes the extensive database and analytical resources of First American RES and its subsidiary LoanPerformance to classify market segments as relatively safe or vulnerable under the pressure of mortgage payment resets. The most vulnerable will be those who do not have substantial equity in their homes, but hold adjustable rate mortgages (ARMs) with low initial rates, often with interest-only and negative-amortization features.

The study concludes, however, that while individual families and firms that are involved with the riskiest loans may suffer, on a national basis the impact of mortgage payment reset and subsequent default will not significantly impact the economy, as it will result in approximately $110 billion in losses, or less than 1 percent of total U.S. mortgage lending annually.

"Mortgage payment reset is likely to be the most important issue facing mortgage servicers and investors in the non-prime market during the next few years," said George Livermore, president of The First American Corporation's Property Information and Services Group. "This analysis provides helpful guidance for mortgage professionals by explaining key dynamics associated with mortgage payment reset and provides a method for evaluating risk."

The states with the lowest percentage of high-risk properties, where borrowers have more equity and are therefore less likely to experience the impact of reset, include New York, Hawaii, Massachusetts, Connecticut and New Jersey. The states with the highest percentage of risky properties, where fewer borrowers have significant equity and face greater likelihood of experiencing reset sensitivity include Tennessee, Colorado, Minnesota, Alabama and Arkansas. California was not on either list.