U.S. Mortgage Delinquency Rates Setting More Records 10 comments
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The scale of the challenge facing the new mortgage modification program is illustrated by the latest quarterly delinquency report from the Mortgage Bankers’ Association, which shows deterioration on almost every measure.
According to the MBA the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 7.88 percent of all loans outstanding as of the end of the fourth quarter of 2008, up 89 basis points from the third quarter of 2008, and up 206 basis points from one year ago,
The delinquency rate breaks the record set last quarter and the quarter-to-quarter jump is the also the largest.
One potential glimmer of hope is a decline in the number of new foreclosures on subprime mortgages, though the level is still much higher than a year earlier. But even there the MBA offers a note of caution:
The rate of new foreclosures has remained essentially flat for the last three quarters of 2008. This might be seen as a good sign for mortgage performance, but most other measures point to exactly the opposite conclusion.
The percentage of loans 90 days or more past due jumped sharply in the fourth quarter. Normally servicers would have initiated foreclosure actions on a significant portion of these loans but delayed doing so for a variety of reasons, including working on loan modifications, complying with the guidelines of different investors, and various delays in different locales. In addition, some servicers report a spate of borrowers running their accounts 90 days delinquent in order to qualify for certain modifications.
A free summary is available here and the full survey can be purchased here.
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Sub-prime MAY be abating (don't count on it) but what about all those no-doc alt-A's and the Jumbos?
Tsunami II is coming! We have 4 more years of crap mortgages to go (the wave should peak around 2012-13).
Alt-A's are much larger percentage wise than even sub-prime. And with the economy headed for depression look to Prime mortgages to start failing as well because of the National Layoff Festival.
I fully expect the trend of stagnant foreclosures to continue through most of 2009. Which is most unfortunate, because when the banks have no choice but to stop pretending, it will make 2008 look exceedingly mild, even non-eventful, in comparison.
> Refinance the loans for 40 years at 5% interest. This makes the payments
> more affordable.
Who is going to write a 40 year note at 5% on an already risky loan?
Better than having the government / tax payers bail them out.
Principal write-downs and affordable interest rates combined may ameliorate the wave of pending foreclosures, especially for those who hang on to their jobs and therefore have an income stream.
On Mar 06 02:57 PM stockdoc123 wrote:
> Refinance the loans for 40 years at 5% interest. This makes the payments
> more affordable.
These two statements say it all (from Mortgage Liquidity Du Jour by Credit Suisse, March 2007)
"low/no documentation loans increased from just 18% of purchase originations in 2001 to 49% in 2006"
"sampling 100 stated income loans found that 60% of borrowers had "exaggerated" their income by MORE than 50%"
That means 30% of ALL mortgages in 2006, the buyer only had 66% of the income they claimed. Some of the other mortgages were also likely bad from minute one. If the buyer lied by 49% or 30% on their application?
This isn't going away easy!
On Mar 06 05:14 PM stockdoc123 wrote:
> >Who is going to write a 40 year note at 5% on an already risky loan?
>
>
> Better than having the government / tax payers bail them out.
On Mar 06 06:10 PM Aristophanes wrote:
> Won't work. Evidence shows that people will simply not pay and will
> rationally default unless they are in positive equity. No equity
> and they will leave via foreclosure and drive their neighbours prices
> down as well. Those are the contract terms drawn up to specifically
> frame the process without moral terms. If you want to talk morality,
> go to a Priest. If the greedy lend to the stupid, then this is what
> you end up with.
>
> Principal write-downs and affordable interest rates combined may
> ameliorate the wave of pending foreclosures, especially for those
> who hang on to their jobs and therefore have an income stream.<br/>
CSUB Professor of Economics Mark Evans was quoted as saying, "We are going to have to live with large deficits for a long time, and there is no other way." I disagree with that statement. I believe there is another way out of the Economic Crisis. I have over 40yr of being in the financial world. President Obama and Professor Evans are relying on Keynesian Economics. John Maynard Keynes created these economic policies in the 1930s. Many economist of his time disagreed with him, but it turned out he was correct, in his time, in an inefficient way. His policies, put governments into massive debt, more government programs are created. Over the years, larger and larger governments are developed. His policies work but he did not leave a handbook behind on how to correctly slow down the economy when it is so strong that it is creating an economic crisis. Our economy is in economic crisis. Not from being too strong but from being too weak, after a very strong period.
President Obama is once again applying Keynesian Economics to the problem. Our economy has changed tremendously since the Great Depression. The economy has become so large and electronically sophisticated, that we need new methods of correcting economic crises. People have become more aware of credit use, which expands the money supply without government spending. The Government just has to have the right policies in place at the right time in the economic cycle for the economy to work efficiently. The old ways do not work any more. We have to try something different. What the government is doing is not working!
What is recession? A recession is caused by excessive supply created by over production. Recession is also created by insufficient demand because of insufficient available cash purchasing power. Recession is also the inability or desire of people to obtain credit because of a lack of confidence in the future or it has become too expensive or restrictive. This causes an insufficient amount of money value in the economy, resulting in people not having sufficient cash purchasing power to exchange for new produced value. It feeds upon itself further decreasing economic activity every time some one loses their job. The idea is to increase economic activity so people can go back to work and take care of themselves and their families, increasing their purchasing power there-by increasing demand. A majority of Americans enjoy their freedom and want to earn a living without government interference. If you are going to say people abused the credit system. I agree with you. A home should be valued for the protection it gives you from the weather and the security it gives your family.
I have developed new policies that correct economic crisis, such as recessions, inflation, and depressions, in a more efficient way. My desire would be for you to read the Alternative Economic Stimulus Plan. It is not over a 1000 pages like President Obama’s Economic Recovery is. It is posted at americansolutions.com Put "happyashell" in the search box. There are several articles, I would start with THE VULTURES ARE CIRCLING. There I hope you will find answers to the questions. How did we get ourselves into this economic crisis? How will we get ourselves out of this economic crisis? I believe that unless Congress hears from the people we will continue reliving history with gloom, boom, and doom economics.
THE VULTURES ARE CIRCLING
The value of our homes has been the backbone of our money supply. If you presently owe more than your home is worth the vultures are circling. The bankers and investors servicing your loan want you to make payments on a loan that may be more than what your home will sell for. The vultures are waiting until you default on your loan, to pick the economy’s bones clean. The housing bubble has burst and prices are coming down. This has led to federal action to stabilize and re-inflate the housing market.
The government (your representatives in Washington) should change the tax policy for bank business losses, so banks are motivated to lower the principle balance of your loan. We should support President Obama as he lowers interest rates and pays banks or investors one-half of the amount that is forgiven on each home loan. If interest rates are lowered low enough, the mortgage reduction policy is the only part of his plan we may need. We may not need that policy either if the banks and investors come to realize that marking down the mortgage is in their best interest, tax and capital wise.
Let me explain the capital advantage. When a bank has a non-performing asset the value of the asset decreases more than if the bank discounts the mortgage. After discounting the asset's value, the asset becomes a performing asset again and is worth twice as much. more info. americansolutions.com search "happyashell"