Prime Mortgages Going Bust at an Alarming Rate

Real Estate Agent with Palatium Auction and Appraisal Service, Real Estate Auctions, Estate, Moving, Downsizing Auctions 618-233-1000 USPAP Appraisals

Aftershocks from the nation’s financial crisis continue rumbling through the housing sector as fixed-rate mortgages held by the safest borrowers accounted for nearly 37% of new foreclosures during the first three months of this year, the Mortgage Bankers Association recently reported.

Additionally, more than one in 10 homeowners were behind on their mortgage payments in the first quarter—a record, the association said. That’s up from 9.47% in the last three months of 2009.

Prime loans, those made to the safest borrowers with the highest credit scores, account for almost 66% of outstanding U.S. mortgages, so their rising foreclosure numbers are troubling. “People with higher scores are defaulting at rates we have not seen in the past,” said Jay Brinkmann, the chief economist for the trade group.

The slide into foreclosure of the strongest borrowers is partly a function of the nation’s unemployment rate, which is now 9.9%. The Great Recession has mowed down white-collar and blue-collar workers alike.

In the first quarter, almost 21% of foreclosure starts were for adjustable-rate mortgages held by credit-worthy borrowers. Fixed and adjustable-rate prime mortgages combined accounted for more than 57% of all new foreclosures.

The MBA’s data also showed that more than 6% of fixed-rated prime mortgages were delinquent from January to March and more than 13% of all homeowners with adjustable-rate prime mortgages were behind on payments.

California—the most populous state, which accounts for more than 13% of all U.S. mortgages—seems to have turned a corner in housing problems. It held 21% of all foreclosure starts during the first quarter of 2009 but only 14.5% in the first quarter of 2010.

Florida improved but only slightly, from 16.1% of first-quarter 2009 foreclosure starts to 15.3% in the same period this year.

“We’re actually starting to see improvement in California. Florida is a little slower,” Brinkmann said.

Some analysts saw the report as a glass half full, partly because of a wide variation between the numbers when they were adjusted statistically for seasonal variation. Many numbers, when not seasonally adjusted, showed a slight improvement over the final quarter of 2009. These included a drop in delinquent loans.

“I’d say we’re probably hitting a turning point, but if you call me in six months, who knows?” said Patrick Newport, an economist who specializes in housing for forecaster IHS Global Insight. He pointed to the improving labor market and a drop in serious delinquencies reported by Fannie Mae, the mortgage finance giant.

One potentially troubling trend emerged: foreclosure starts rising in states that aren’t commonly viewed as housing-bubble states. Washington state posted the largest increase in foreclosure starts overall in 2010’s first quarter versus a year earlier, followed by Maryland, Oregon and Georgia. Washington state also posted the largest rise in foreclosure starts that involved prime and subprime adjustable-rate mortgages.

In another troubling trend, 42 states and the District of Colombia saw increased foreclosure starts for homes that were carrying FHA loans, which are considered among the safest. Only nine states, including Alaska and Idaho, saw foreclosure starts for FHA loans fall.

The rise in prime-mortgage foreclosures is important in the context of the sweeping revamp of financial regulation that’s moving through Congress. Big financial institutions are trying to defeat a provision that would require them to retain 5% of the mortgages that they underwrite or sell into a secondary market to be packaged into mortgage bonds. They argue that they shouldn’t have to do this for prime fixed-rate loans, but the latest data show that these loans aren’t immune to delinquency and foreclosure.

The data also suggest that the Obama administration’s efforts to reverse the rate of delinquencies and foreclosures haven’t been effective. The Treasury Department recently reported that lenders or loan servicers had permanently modified only 68,000 mortgages in April, while more than 277,000 modification offers were canceled and presumed to be back on foreclosure tracks.

Read the story


Posted by

Paul Roesch
Realtor, Auctioneer, CAI, AARE, CES, GPPA, ATS
Marketing Director 
Certified Distressed Property Expert, CDPE
618-407-8479 cell

 Add me as a Friend on Facebook Paul M. Roesch                                                                        

Free Sign Bidder Early Bird Notification of Upcoming Auctions

Auctionitnow  Father Time Auctions St Louis MO

All original text, video, and photo content is the exclusive property of Paul Roesch and / or Palatium Auctions (the Company) and may not be used without expressed written permission. All information deemed reliable but not guaranteed. All personal, real and intellectual property is subject to prior sale, change or withdrawal. Neither the Company or information provider(s) shall be responsible for any typographical errors, misinformation, and misprints and shall be held totally harmless. Listing(s) information is provided for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. The Company has no control over the quality, safety or legality of the Auction Items listed, the truth or accuracy of the listings or any other information provided by Sellers about the Items. Listings may be sold, withdrawn at any time or subject to change without notice.


This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
ActiveRain Community
Missouri Saint Louis County
prime mortgages
father time auctions and real estate auctioneers st louis mo
missouri real estate agent auctioneer paul roesch

Post a Comment
Spam prevention
Spam prevention
Post a Comment
Spam prevention

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Paul Roesch CDPE 618-233-1000

Real Estate Auctioneer CAI St Louis MO Auctions
How Does an Auction Work
Spam prevention

Additional Information