Tuesday, March 13, 2007

More About Late Mortgage Payments

After yesterday's announcement by Countrywide home loans, more information is coming about how late payments have hit a historical high. According to MSNBC.com news:
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported that the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.

That marked a sharp rise from the third-quarter’s delinquency rate of 4.67 percent and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97 percent.

It appears that much of the cause is due to subprime loans - or that second loan needed to make it to a 100% loan (typically an 80-20 loan split between two lenders). One problem experienced by a friend of mine is that that second loan was an adjustable rate mortgage. After her two-year guarantee was up at a lower rate, the second mortgage jumped by over $200 p/month. When you're on a bare-bones (or bare-pantry in this case) budget already, that $200 becomes nearly impossible to pay. So people pay that first, more expensive mortgage and let the second slide for several weeks (until next payday) or month(s).

In my bigger economic picture (and let me stress that I'm NOT an economist), I worry that we are heading into a recession. Some more articles:

Subprime lendings next act

Weak housing market weighs on job growth

Will subprime mess ripple through economy?

Treasury: Subprime issues manageable

Freddie Mac refuses some subprime loans

More homes, fewer buyers

Subprime apocalypse? or not

New foreclosures at record high

So you see the lending industry is reeling, at least for subprime lenders.

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