SUB PRIME LOANS IN MONTANA
OR
WHY OUR HOUSING SLUMP IS SOFTER THAN ELSE WHERE
IN LOOKING AT THE HOUSING MARKET IN THE UNITED STATES THEN MONTANA AS A SUB MARKET OF THAT THE USE OF SUB PRIME LOANS WAS SMALL WHEN COMPARED TO THE COUNTRY AS A WHOLE IF COMPARED TO CALIFORNIA ALMOST NOT USED.
LET'S LOOK AT THE NUMBER OF SUB PRIMES IN FORCE RIGHT NOW
UNITED STATES CALIFORNIA MONTANA
# OF LOANS 2,586,243 369,857 3,598
FROM THE ABOVE NUMBERS YOU CAN SEE HOW SMALL THE NUMBER OF SUB PRIME LOANS ISSUED IN MONTANA WAS IN A POPULATION COMPARISON CALIFORNIA ISSUED A 1000 TIMES MORE SUB PRIME LOANS IF IT HAD THE DEGREE OF POPULATION THERE WOULD BE ALMOST 100 MILLION PEOPLE LIVING THERE. PUTS THE COMPARISON IN PERSPECTIVE
THE NEXT COMPARISON IS THE LOAN AMOUNT WHEN WE LOOK AT THE NUMBERS FOR MONTANA; THE THING THAT STANDS OUT TO ME IS THE LOAN AMOUNT. AT THE AVERAGE BALANCE IT SAYS TO ME THAT AT LEAST IN MONTANA IT APPEARS THE LOANS WE USED FOR FIRST TIME BUYER CATEGORY HOMES AND INDIVIDUALS.
UNITED STATES CALIFORNIA MONTANA
LOAN AMOUNT $181,412 $322,260 $150,656
ON THE SURFACE IT WOULD BE A CONCERN THAT HOME PURCHASERS WERE DIRECTED AWAY FROM MORE DESIRABLE LOANS FOR THE PURCHASER TO A HIGHER PROFIT LOAN FOR THE LENDER.
AS PART OF THE DISCUSSION ABOUT PROFITABILITY AND COSTS THE MAIN ITEM WOULD BE THE INTEREST RATE ON THE LOAN AND THAT INFORMATION IS AS FOLLOWS.
UNITED STATES CALIFORNIA MONTANA
INTEREST RATE 8.17 7.37 8.41
YOU CAN SEE BY THE COMPARISON THAT BORROWERS WERE DEFINITELY PAYING MORE TO BORROW SUB PRIME THAN NATION AS WHOLE AND STARK CONTRAST TO CALIFORNIA.
PART ON THE DISCUSSION OF COST TO OBTAIN FINANCING HAS TO CONTAIN THE CREDIT SCORE DISCUSSION AND THERE IS DISTINCT DIFFERENCE BETWEEN MONTANA AND CALIFORNIA YET NOT A WIDE VARIANCE COMPARED TO THE UNITED STATES. SINCE THE INFORMATION I HAVE DOES NOT BREAK DOWN BY COUNTY I MUST ASSUME AS WITH THE MAJORITY OF ACTIVITY IN MONTANA THE LENDING OCCURRED IN THE SEVEN LARGEST "URBAN" AREAS.
SINCE MONTANA TENDS TO HAVE LOWER WAGES INDIVIDUALS DON'T HAVE AS MUCH CUSHION OR MARGIN OF ERROR IN THEIR FINANCES WHICH MAY HELP EXPLAIN SOME OF THE DIFFERENCE IN THE FICO SCORES. THE FIRST SET OF FICO SCORES IS THE AVERAGE FOR ALL THE LOAN THAT WERE ISSUED THE SECOND SET OF NUMBERS IS FOR THE NUMBER OF LOANS ISSUSSED WITH A FICO SCORE ABOVE 660. WITH THAT SCORE, AT LEAST IN MONTANA, I WOULD HAVE BELIEVED THAT THOSE BORROWERS WOULD HAVE BEEN BETTER SERVED WITH A FHA OR MONTANA BOARD LOAN.
AVERAGE FICO SCORES FOR LOANS ISSUED
UNITED STATES CALIFORNIA MONTANA
FICO SCORE 617 640 612
PERCENTAGE OF LOANS WITH A FICO SCORE OF 660 OR HIGHER
UNITED STATES CALIFORNIA MONTANA
FICO SCORE 21.4% 35.1% 18.3%
THE LAST ISSUE I WILL DEAL WITH IS DEFAULT RATE. THE MAJOR ISSUE TERMS OF VALUE IS THE AMOUNT OF REO HOMES ON THE MARKET. LENDERS HAVE NO INTEREST IN OWING PROPERTY, WHILE NOT THEIR OVERALL DESIRE TO LOSE MONEY ON AN REO FROM AN OVER ALL REGULATORY ENVIRONMENT IT IS NOT A POSITIVE TO HAVE A LARGE REO INVENTORY. THEREFORE LENDERS WILL CHANGE PRICING TO "SELL" THE PROPERTIES RATHER THAN RETAIN THEM.
NUMBERS OF LOANS WITH A LATE PAYMENT IN THE LAST 12 MONTHS
UNITED STATES CALIFORNIA MONTANA
FICO SCORE 64.0% 67.1% 54.9%
PERCENT OF LOANS IN REO
UNITED STATES CALIFORNIA MONTANA
FICO SCORE 6.3% 12.0% 2.9%
WHEN LOOKING THE INFORMATION IN TOTAL THE PICTURE OF MODERATE HOUSING PROBLEMS EXIST IN MONTANA CAUSED BY SUB PRIME LENDING. THIS IS AN OVERALL VERY POSITIVE POSITION FOR MONTANA AS WHOLE TO BE IN. WHILE I KNOW THE WESTERN HALF OF THE STATE IS STRUGGLING MUCH MORE THE EASTERN HALF, THE WESTERN HALF STRUGGLES WILL LARGELY BE CORRECTED BY THE ENDING OF THE RECESSION AND EMPLOYMENT OF PEOPLE LIVING IN MONTANA. OF COURSE THOSE AREAS WILL STRUGGLE SOME WITH PRICING ADJUSTMENT WITH THE WITH DRAWL OF "OUTER STATER'S" BIDDING UP RECREATIONAL PROPERTIES WITH THE OVERFLOW HIGHER VALUES OF MONTANAN'S RESIDENCES. OVERALL MONTANA WILL NOT SEE THE WEAPONS OF MASS FINANCIAL DESTRUCTION CRUSH HOME VALUES IN MONTANA.
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