Monday, December 18, 2006 –
WASHINGTON, D.C.- The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 4.67 percent of all loans outstanding in the third quarter of 2006 on a seasonally adjusted (SA) basis, up 28 basis points from the second quarter, and up 23 basis points from one year ago, according to MBA's National Delinquency Survey.
The increase was driven by increases in delinquencies for all major loan types, most notably for subprime and FHA loans. Delinquency rates for prime, subprime, and FHA loans increased on a seasonally adjusted basis relative to the second quarter.
The percentage of loans in the foreclosure process was 1.05 percent of all loans outstanding at the end of the third quarter, an increase of six basis points from the second quarter of 2006, while the SA rate of loans entering the foreclosure process was 0.46 percent, three basis points higher than the previous quarter. Compared with the third quarter of 2005, the percentage of loans in the foreclosure process was up eight basis points while the percentage of loans entering the foreclosure process was up five basis points. This quarter's NDS results cover over 42.6 million loans (32.6 million prime loans, 5.8 million subprime loans and 4.2 million government loans).
"The housing market continued to normalize in the third quarter of 2006. Although labor markets remain strong, the pace of job growth has slowed, as has the home price appreciation rate which has decreased in response to higher interest rates and rising inventories of unsold homes. Some states experienced home price declines in the third quarter, and a few have experienced declines over the past six months," said Doug Duncan, MBA's chief economist and senior vice president of research and business development.
"As we had expected, in the third quarter delinquency rates increased across the board. However, increases in delinquency rates were noticeably larger for subprime loans, particularly for subprime ARMs. This is not surprising given that subprime borrowers are more likely to be susceptible to the cumulative increases in rates we've experienced, and the slowing of home price appreciation that has resulted. It is important to remember that delinquency and foreclosure rates have been quite low the last two years. "
"We expect the housing market to fully regain its footing in the middle of 2007. In the meantime, we anticipate some further increases in delinquency and foreclosure rates in the quarters ahead," added Duncan.
Change from last quarter (second quarter of 2006)
All adjustable rate (ARM) as well as fixed rate (FRM) loans had higher SA delinquency rates compared to the second quarter of 2006. The SA delinquency rate for prime ARMs increased 36 basis points (from 2.70 percent to 3.06) and the rate for prime FRM loans increased ten basis points (from 2.00 to 2.10 percent). The SA delinquency rate for the subprime FRM loans increased 35 basis points (9.23 percent to 9.56 percent), whereas the rate for subprime ARMs increased 98 basis points (12.24 percent to 13.22 percent).
The SA delinquency rate increased during the third quarter for all loan types. The delinquency rate increased 15 basis points for prime loans (from 2.29 percent to 2.44 percent), increased 86 basis points for subprime loans (from 11.70 percent to 12.56 percent), increased 35 basis points for FHA loans (from 12.45 percent to 12.80 percent), and increased 23 basis points for VA loans (from 6.35 percent to 6.58 percent).
During the third quarter of 2006, the foreclosure inventory rate increased across the range of loans. The foreclosure inventory rate increased three basis points for prime loans (from 0.41 percent to 0.44 percent), 30 basis points for subprime loans (from 3.56 percent to 3.86 percent), eight basis points for FHA loans (from 2.20 percent to 2.28 percent), and two basis points for VA loans (from 1.10 percent to 1.12 percent).
By loan type, the percent of new foreclosures increased one basis point for prime loans (from 0.18 percent to 0.19 percent), three basis points for subprime loans (from 1.79 percent to 1.82 percent), four basis points for FHA loans (from 0.75 percent to 0.79 percent) and decreased three basis points for VA loans (from 0.35 to 0.32 percent).
In the third quarter of 2006, the percent of loans that were seriously delinquent, which is defined as the non-seasonally adjusted (NSA) percentage of loans that are 90 days or more delinquent or in the process of foreclosure, was 2 percent, 11 basis points higher than for the second quarter of 2006. This measure is designed to account for inter-company differences on when a loan enters the foreclosure process.
Change from last year (third quarter of 2005)
Since the third quarter of 2005, the SA delinquency rate increased for prime loans, subprime loans and FHA loans, while decreasing for VA loans. The delinquency rate increased ten basis points for prime loans, 180 basis points for subprime loans, and five basis points for FHA loans, whereas the delinquency rate fell 54 basis points among VA loans.
Compared with the third quarter of 2005, the delinquency rate increased 76 basis points for prime ARM loans and 267 basis points for subprime ARM loans. The delinquency rate decreased one basis point for prime fixed loans, while the delinquency rate for subprime fixed loans increased 80 basis points.
The percentage of loans in the foreclosure process increased for all loan categories except VA since the third quarter of 2005, which increased three basis points for prime loans, 55 basis points for subprime loans, and three basis points for FHA loans. Among VA loans, the percentage of loans in foreclosure decreased seven basis points since the third quarter of 2005.
Over the course of the year, the SA percentage of new foreclosures increased one basis point for prime loans and 43 basis points for subprime loans. The percentage of new foreclosures decreased seven basis points for VA loans and decreased by nine basis points for FHA loans.
State and Regional
Across all loan types, the states with the highest overall delinquency rates were Mississippi (11.05 percent), Louisiana (9.50 percent) and Michigan (6.68 percent). Based on foreclosure inventory rates across all loan types, the top three states were Ohio (3.32 percent), Indiana (2.90 percent) and Michigan (2.20 percent). All state level results are not adjusted for seasonal effects.
The states with the largest increase in overall delinquency rate in the past year were Michigan (135 basis points), Rhode Island (128 basis points), and Ohio (96 basis points). The states with the largest increase in foreclosure inventory rate were Michigan (59 basis points), Rhode Island (46 basis points), and Maine (43 basis points).
From the third quarter of 2005, 44 out of 51 states saw their delinquency rate increase, while 35 states saw an increase in the foreclosure inventory rate.
At the regional level, the Northeast region had an overall SA delinquency rate of 4.39 percent, the North Central region had a delinquency rate of 5.44 percent, the South had a delinquency rate of 5.37 percent and the West had a delinquency rate of 2.81 percent, compared to the national rate of 4.67. For the foreclosure inventory rate, the Northeast region had a rate of 1.06 percent, the North Central region had a rate of 1.89 percent, the South had a rate of 0.99 percent and the West had a rate of 0.49 percent, compared to the national foreclosure inventory rate of 1.05 percent of all loans.
Article From:http://originatortimes.com/content/templates/standard.aspx?a=2223&z=5&page=1
Thursday, December 28, 2006
Group Says 2.2 Million Borrowers Face Foreclosure on Subprime Loans
WASHINGTON, D.C. – A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
CRL's research suggests that risky lending practices have triggered the worst foreclosure crisis in the modern mortgage market, projecting that one out of five (19.4%) subprime loans issued during 2005-2006 will fail.
"In the subprime sector, the most vulnerable borrowers are sold the most dangerous loans," said Mike Calhoun, CRL president. "At $164 billion, the losses from foreclosures could pay for the college educations of four million kids. For families who lose their houses because their loans fail, savings and economic security will be way out of reach."
The report discusses a number of factors that drive subprime foreclosures -- in the majority of cases, borrowers receive high- risk loan features, packed into an adjustable rate mortgage with a low start rate that is approved without considering whether the homeowner can afford to pay the loan after the rate rises.
Adjustable rate mortgages known as 2/28s (or "exploding ARMs") operate with an initial "teaser" rate for two years, followed by a steep payment increase. And, regardless of a borrower's credit history, the almost one-quarter of American families who get subprime loans find them crammed with other high- risk terms such as prepayment penalties, limited income documentation, and no escrow for property taxes and hazard insurance.
In recent years, high appreciation in many areas has masked problems in the subprime market. CRL projects that the cooling housing market, will cause failure rates to rise sharply in many major markets. California, Arizona, Nevada, and greater Washington, DC will be especially hard hit.
"Foreclosures can be a disaster not only for the family but for the community as well," said Pat Vredevoogd Combs, president of National Association of Realtors. "When one home forecloses, the surrounding houses lose value, too. By threatening neighborhood stability, foreclosures hurt everyone."
Trouble in the overall subprime market spells trouble for African American and Latino families across the country. Although white families receive more subprime loans overall, African Americans and Latinos receive a higher proportion of high-cost loans than any other group, a fact consistently verified annually by data lenders submit under the Home Mortgage Disclosure Act (HMDA). "Losing Ground" estimates that 8 to10 percent of all African American and Latino families who received a home loan in 2005 will be affected by subprime foreclosures.
"Homeownership rates for minorities are up but so, too, is the cost of that homeownership," said Wade Henderson, executive director of Leadership Conference on Civil Rights. "We need rules to curb predatory lenders, but we also need prime lenders to step up for this expanding market of borrowers."
Policymakers and regulators can and must act to stem the tide of home failures in the subprime market. To accomplish this CRL recommends that:
• Lenders ensure that every borrower is able to repay his or her loan without resorting to selling their property or refinancing under pressure.
• All parties involved operate in good faith and fair dealing to ensure a successful outcome.
• Lenders, local governments, and community groups implement strong programs to help troubled borrowers keep their homes.
Article from: http://originatortimes.com/content/templates/standard.aspx?articleid=2235&zoneid=5
CRL's research suggests that risky lending practices have triggered the worst foreclosure crisis in the modern mortgage market, projecting that one out of five (19.4%) subprime loans issued during 2005-2006 will fail.
"In the subprime sector, the most vulnerable borrowers are sold the most dangerous loans," said Mike Calhoun, CRL president. "At $164 billion, the losses from foreclosures could pay for the college educations of four million kids. For families who lose their houses because their loans fail, savings and economic security will be way out of reach."
The report discusses a number of factors that drive subprime foreclosures -- in the majority of cases, borrowers receive high- risk loan features, packed into an adjustable rate mortgage with a low start rate that is approved without considering whether the homeowner can afford to pay the loan after the rate rises.
Adjustable rate mortgages known as 2/28s (or "exploding ARMs") operate with an initial "teaser" rate for two years, followed by a steep payment increase. And, regardless of a borrower's credit history, the almost one-quarter of American families who get subprime loans find them crammed with other high- risk terms such as prepayment penalties, limited income documentation, and no escrow for property taxes and hazard insurance.
In recent years, high appreciation in many areas has masked problems in the subprime market. CRL projects that the cooling housing market, will cause failure rates to rise sharply in many major markets. California, Arizona, Nevada, and greater Washington, DC will be especially hard hit.
"Foreclosures can be a disaster not only for the family but for the community as well," said Pat Vredevoogd Combs, president of National Association of Realtors. "When one home forecloses, the surrounding houses lose value, too. By threatening neighborhood stability, foreclosures hurt everyone."
Trouble in the overall subprime market spells trouble for African American and Latino families across the country. Although white families receive more subprime loans overall, African Americans and Latinos receive a higher proportion of high-cost loans than any other group, a fact consistently verified annually by data lenders submit under the Home Mortgage Disclosure Act (HMDA). "Losing Ground" estimates that 8 to10 percent of all African American and Latino families who received a home loan in 2005 will be affected by subprime foreclosures.
"Homeownership rates for minorities are up but so, too, is the cost of that homeownership," said Wade Henderson, executive director of Leadership Conference on Civil Rights. "We need rules to curb predatory lenders, but we also need prime lenders to step up for this expanding market of borrowers."
Policymakers and regulators can and must act to stem the tide of home failures in the subprime market. To accomplish this CRL recommends that:
• Lenders ensure that every borrower is able to repay his or her loan without resorting to selling their property or refinancing under pressure.
• All parties involved operate in good faith and fair dealing to ensure a successful outcome.
• Lenders, local governments, and community groups implement strong programs to help troubled borrowers keep their homes.
Article from: http://originatortimes.com/content/templates/standard.aspx?articleid=2235&zoneid=5
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