Green Shoots: Delinquencies Double on Least-Risky Loans
July 1st, 2009Via: Bloomberg:
Delinquency rates on the least-risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.
Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.
“I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement with the report. President Barack Obama’s plan to create “sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said.
Obama’s program, unveiled Feb. 18, aims to help as many as 4 million homeowners by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their houses are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007.
“Job losses have mounted and even those with good credit that were able to get a prime mortgage are having a harder time making monthly payments with a loss of income,” said Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania.
Serious Delinquencies
Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said.
Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, the report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months; 63 percent were in default after a year.
As lines of credit deteriorate, home prices are moderating. The S&P/Case-Shiller home-price index for 20 major U.S. metropolitan areas fell 18 percent in April from a year earlier, the smallest decline in six months.
“When home prices are down, many homeowners have negative equity, not just subprime borrowers have trouble but prime borrowers do as well, and foreclosures are more likely,” Chen said.
