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Mortgage Delinquencies Rising
By Dirk Van Dijk on October 1, 2009 | More Posts By Dirk Van Dijk | Author's Website

Two of the main banking regulators, the OCC and the OTS, jointly released data on mortgage performance in the second quarter today, and the news was not good. The report covers 34 million individual first mortgages totaling about $6 Trillion.

All types of delinquencies were up, but most distressing was the information about serious delinquencies, or mortgages that are more than 60 days past due. They reached 5.3% of all mortgages, up from 4.7% in the first quarter, an increase of 11.5%. Foreclosures-in-process reached 2.9% of all mortgages, up from 2.4% in the first quarter — a 16.2% increase.

It didn’t matter which risk category of loan you looked at, delinquencies were going up everywhere. The percentage of prime mortgages that were delinquent rose 10.5% to 3.0%, and are up 13.0% from a year ago. Alt-A delinquencies rose 11.1% from the first quarter to hit 10.3%, and the percentage of seriously delinquent subprime mortgages grew by 12.9% to hit 17.8%.

While the delinquency rate is much higher for subprime than prime mortgages, there are far more prime mortgages than subprime or Alt-A mortgages. Thus, as is shown in the graph below (from http://www.calculatedriskblog.com/) the actual number of problem prime loans is substantially larger than the number of problem subprime loans.

Prime loans also tend to be much larger than subprime loans, so when they go south they are a bigger problem for the banks that lent the money (or the holders of the MBS that hold the mortgages after they have been sliced and diced). Note that in the first quarter the number of seriously delinquent subprime loans actually fell, and the number of problem Alt-A loans was stable.

But problem primes have been on a relentless increase. The purple “other” bar is a mix of the three types of loans, but for which the original credit scores were unavailable, usually because they had been acquired from a mortgage servicing firm that went belly-up and the records were lost.

For the first time, the report looked at Option ARMs as a separate category (although they are included in Alt-A in the chart).  They found that this was a particularly dangerous area. In the second quarter, 15.2 percent of Payment Option ARMs were seriously delinquent, compared with 5.3 percent of all mortgages, and 10 percent were in the process of foreclosure, more than triple the 2.9 percent rate for all mortgages. Only a small fraction of these have actually recast to make them fully amortizing. Recasting will result in far higher monthly payments, sometimes as much as doubling them. If large numbers of these loans are in trouble before the recast hits, they will be an absolute disaster afterwards.

Government guaranteed loans were also seeing very serious problems. The Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) also showed higher delinquencies than the overall servicing portfolio. Serious delinquencies increased to 7.5 percent of all government guaranteed mortgages, up from 6.8 percent in the previous quarter.

This is going to be a much bigger problem going forward. Essentially the FHA has stepped into the shoes of the subprime “zero down, buy it now” crowd. They are offering mortgages with only 3.5% down, which in declining markets is almost a guarantee that they will soon be underwater and at very high risk of people walking away from the houses. After all the trouble of the last few years, you would have thought that someone would have figured out that if people don’t have much skin in the game, the odds of default are very high.

This is another of the massive government props to the housing market, along with the first-time buyers tax credit (which can be used along side a FHA loan, so it is possible to actually buy a house and walk away from the closing with a check in your pocket.  And you thought all the mortgage stupidity went away lest year.) There is an extremely high likelihood that the FHA will need a massive bailout in the next few years.

I think this report makes clear that the whole mortgage complex is far from out of the woods. Everyone from the big banks like Bank of America (BAC: 16.34 +0.13 +0.80%) to the GSE’s Fannie (FNM: 1.42 -0.04 -2.74%) and Freddie (FRE: 1.66 -0.07 -4.05%) to the private mortgage insurance firms like PMI Group (PMI: 3.98 +0.13 +3.38%) and MGIC (MTG: 6.75 +0.12 +1.81%) still face major problems, problems that are getting worse, not better.

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hksmallray 發表於 2011-8-5 12:11 AM

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9月頭賣金係正確策略,因為最恐怖既野係金都被人用leverage抄起,市場資金一收縮,金都要跌

開始明白金錢流通總量,對所謂的價值既影響
hksmallray 發表於 2011-9-24 11:26


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