"The core of the problem remains soaring home loan defaults."
Note: Have you noticed, too, that links to the Los Angeles Times Online require a lot of patience? I do not always get through successfully on the first couple of tries, let alone the first try, do you? Patience goes a long way in that regard, as it does elsewhere in life, I guess.
Mortgage foreclosures have never been higher since the Mortgage Bankers Association began keeping records 30 years ago. In fact, for almost 30 years, the foreclosure rate was never larger than 7%. That changed in 2007. In 3Q2007, the percentage of mortgages in foreclosure or past due increased to 7.3%. At the end of the 4Q2007, the percentage of mortgages in arrears or in foreclosure climbed to 7.9% of all mortgages held by all borrowers across the United States. Vikas Bajaj, "As Foreclosures Rise, Investors Pull Back" (New York Times Online, Friday, March 7, 2008).
The current surge in foreclosures began with subprime mortgages, which are generally made to home buyers who have low incomes or poor credit. However, the Mortgage Bankers Association's current survey evidences delinquencies and foreclosures for prime mortgages too. The effects are felt across the United States. California, Florida, Arizona and Nevada are the States reporting by far the biggest chunk of foreclosures.
These are the currently reported percentages nationally of borrowers who are either significantly behind in their payments or in foreclosure:
- 4.51% of the borrowers holding prime mortgages.
- 8.68% of those with adjustable rate mortgages.
- 28.61% of all Subprime loans.
- 35.15% of adjustable subprime mortgages.
For the first time since the Federal Reserve began keeping records over 60 years ago, Homeowners in the United States owed more money on their houses than they had equity in them. Maura Reynolds, "Foreclosure Rate Hits Record High" (Los Angeles Times Online, Friday, March 7, 2008).
Carlyle Capital and Thornburg Mortgage, two of the larger mortgage investors, could not meet "margin calls--requests from lenders for extra capital to make up for the declining value of their holdings" on Thursday, March 6, 2008. Hamilton & Petruno, supra.
All these developments are factors in a major "tumble" (read: crash) in stock prices. It is a virtual certainty that these same developments will lead and are leading now, to a surge in claims on Mortgage Insurance Policies as well.
Please Read The Disclaimer.
Comments