Riley, Riley. What is it going to take to persuade you that a) Republicans are not the Devil Himself; b) The sky is not falling; c) Despite some issues the economy is excellent by historical measure? Hmm?
Here:
Default rate on U.S. subprime mortgages continues to rise
By Vikas Bajaj
Published: October 16, 2007
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NEW YORK: During the summer credit crisis, investors concluded that the default rates on subprime mortgages made last year would probably prove to be the highest in the industry's history.
But there appears to be another contender for that dubious honor: subprime loans made in the first half of this year.
Borrowers who took out loans in the first six months of 2007 are falling behind on payments faster than homeowners who took out loans last year, according to a report by Friedman, Billings, Ramsey, an investment bank based in Arlington, Virginia.
The data suggested that more Americans could lose their homes and that the housing market's troubles might persist longer than many analysts have been predicting.
The report's author, Michael Youngblood, a portfolio manager and analyst at Friedman, Billings, Ramsey, said that most mortgage companies and banks had not tightened lending standards for borrowers with weak, or subprime, credit until July or August, even though early this year regulators, analysts and mortgage investors knew that the easy lending policies of 2005 and 2006 were producing high default rates.
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"There are $10.6 trillion of mortgage loans outstanding in the U.S., and even if the brakes had been slammed, it was going to take a long time to slow this locomotive down," said Youngblood, who has researched home lending for more than 20 years. "And I don't see that the brakes were slammed on or that the engineer had a new track to follow. That track only now seems to be appearing."
He noted that Countrywide Financial, the largest U.S. lender whose practices are often emulated by smaller companies, did not significantly tighten standards until August.
And it was only in mid-July that Moody's Investors Service and Standard & Poor's, the large ratings agencies, said they would make major changes in the assumptions that they use to evaluate pools of home loans sold to investors.
As of August, default rates on adjustable-rate subprime mortgages written in 2007 had reached 8.05 percent, up from 5.77 percent in July, according to Youngblood's analysis of pools of home loans put together by Wall Street banks and sold to investors.
By comparison, only 5.36 percent of adjustable-rate subprime loans made last year had defaulted by August 2006. Default rates on fixed-rate subprime mortgages were lower, but were rising at a similar pace.
In the first six months of the year, Wall Street securitized $215 billion in subprime loans, down 23 percent from the comparable period a year earlier, according to Friedman, Billings, Ramsey. By the end of August, the total had dropped by 33 percent from the comparable eight months of 2006.
So if 8.05% have defaulted then almost 92% are being paid on time. I'd call that the vast majority. Even accounting for delinquencies, it's still over 80%.
