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CNBC's Diana Olick on "Cure Rates"

By
Real Estate Broker/Owner

On Monday CNBC's Diana Olick wrote a post about mortgage cure rates.  For those of you who haven't read her stuff before, I recommend it.  She is one of a very small minority of housing analysts who understand the comprehensiveness of the housing market.

A cure rate is a term used to represent the percentage of delinquent loans that are returned to "current" status each month.

In other words, for every 100 loans that are delinquent, how many of the owners will get caught up with the payment they have missed.

According to Fitch Ratings, Olick writes that from 2000-2006, 45% of loan delinquencies were being cured.  That percentage has dropped to just 6.6% now.

More interesting, of the 6.6% that are being "cured", approximately 25% of those are from loan modifications.  Unfortunately, statistics have shown that loan modifications have high re-default rates when measured over a period of several months.  

What this cure rate study reveals is that many home owners are on the brink and are unable to rebound as they have before in the past.

This Fitch study, when combined with the recent MBA delinquency study which showed that 13.16% of all mortgages were at least 30 days late, reveals that a massive number of loans will be going into foreclosure over the next 12 months.

While home sales have increased over the past couple of months, the number of foreclosures continues to increase at a greater rate.  This means that home values will continue to erode.

 

Comments(4)

Robert T. Boyer
FHA Loan, VA Loan, Jumbo Loan,FHA Loans,VA Loans,Jumbo Loans - La Jolla, CA
San Diego Real Estate & Mortgage Loans, Ph.D. | VA Home Loan

Dire implications.  I am very interested in learning more.  Thank you!

Aug 25, 2009 04:26 PM
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co

Hey Mark,

Good info.

While I'm not aware of Ms. Olick's report on cure rate, I did (just yesterday) read info reported by the MBA. What struck me was the fact that the delinquencies increased significantly on fixed rate loans. And recovery will most likely depend on joblessness numbers, most likely not improving until mid 2010, and from there it will be another six months if I read that correctly?

Aug 25, 2009 04:31 PM
Jim Crawford
Long & Foster - Fredericksburg, VA
Jim Crawford Broker Associate Fredericksburg VA

Mark this is excellent information anda reality check for America.  In theAtlanta area I for the last few years...new foreclosures each month exceed home sales almost 2 to 1.  There is something structurally wrong with the economy. 

Aug 26, 2009 01:27 AM
Mark MacKenzie
Phoenix, AZ

Robert:  Thanks

Lynda:  You are correct about the rise in prime defaults.  Just yesterday the White House projected 9.8% unemployment in 2010.  While this may be optimistic, you can extrapolate from this that there are going to be a lot more foreclosures into 2010 and probably 2011.

Jim:  That is alarming.  That is the ongoing supply and demand imbalance that I keep writing about.  It is a significant concern for property values.

Aug 26, 2009 02:14 AM