Some Perspective on Subprime Mortgages

The graph above was created using data from the Mortgage Bankers Association's [MBA] most recent release on delinquencies and foreclosures, and a previous MBA report here. Facts:

1. Of the 69.70 million American homeowners, 23.7 million, or 34% of the total, own their homes free and clear.

2. Of the 69.70 million homeowners, 36.8 million, or almost 53% of the total, have prime mortgages (fixed and adjustable).

3. Of the 69.7 million howeowners, 60.5 million, or almost 87%, have a prime mortgage or no mortgage. Add in the 3.22 million FHA loans, and it brings the total percentage to 91.4%.

4. Subprime borrowers (5.98 million) make up the rest, or only 8.58% of all homeowners, and only 4.6 out of every homeowners has a subprime ARM, which make up almost half of the foreclosures started.

5. Of the 46 million mortgages, 2.04% were in the foreclosure process in the fourth quarter of 2007, or about 940,000 homes. Of the total number of homes (69.7 million) including those with no mortgage, the percent of all homes in foreclosure was 1.35%. Obviously then, 98.65% of homes were NOT in the foreclosure process in QIV 2007.

Comments

[Negative carry]

Comparing subprime to the total number of American households is irrelevant. The housing market is made up of the houses _for sale_. At anytime only a few percent of homes are for sale. How does the number of junk loans and foreclosures compare with that number?

[mixter]

I sold all of my financial stocks last summer and paid cash for my house. The idiot lenders and stupid borrowers have gotten what they deserve! Too bad their irresponsible actions are having an adverse effect on financially responsible people. How the C.E.O.'s of the lending institutions are getting by with huge severance packages is beyond comprehension.

[Mark Nelson]

Where are all of the Alt-A's (i.e. soon to be subprime) in your charts? There is even some speculation on just how "prime" some of those prime mortgages might be...

[fabien_hug]

These stats do not say anything about the expectations of those who own their house free and clear. Even if your house is paid in full, looking at your neighbors' transactions or lack of them, you change your expectations.
I think the mistake was to make believe that a non realized increase in the home value is an increase in wealth. It is not unless you are willing to relocate to a much cheaper place (move from US to Costa Rica) or downgrade in the same market.
Now these expectations are reviewed downwards.

[ponchovilla]

Mark: "Obviously then, 98.65% of homes were NOT in the foreclosure process in QIV 2007." It's March 2008. There may be a small problem with leverage and mark to market accounting among a few other things. Apparently Bear Stearns looked at this chart last week. Today their shareholders are looking at the stock price.