The Mortgage Bankers Association, in its testimony to Congress last fall, said that homeownership rates are at record levels, nearly 69 percent. It stands to reason that with a higher rate of ownership, there is a higher rate of foreclosure.
Delinquency rates typically peak 3 to 5 years after origination, which is in keeping with record home sales and record loans following 2001. In other words, this was to be expected.
Approximately 1 percent of all loans are in the foreclosure process, well within historical norms, according to the MBA. That’s still less than the post-recession peak of 1.5 percent just four years ago.
Three out of four loans that enter the foreclosure process will not wind up as a foreclosure sale, either because the home owner cures the delinquency, works out a payment plan with the lender, refinances, or sells the home.
Somewhere between 0.5 percent and 1 percent of all homes going into foreclosure are owned by subprime borrowers, according to estimates by Walt Molony, spokesman for the NATIONAL ASSOCIATION OF REALTORS®. On the low end, that's one home in foreclosure out of approximately 200, suggesting that high foreclosure rates are not just a subprime problem but due to a wide range of other causes.
Finally, subprime borrowers are higher risks and have always had a higher delinquency rate than prime borrowers. Yet, only six percent of home owners are nonprime borrowers with adjustable rate loans that are resetting to higher rates.
Long Beach
3 comments:
Julia,
I'd be a bit wary about looking to the Mortgage Bankers Association for evidence that all is well in the sub-prime market - that's a bit like going to the NAR for reassurance that housing prices are in for a big rebound.
I think it's still early days for the sub-prime issue - a continued decline in housing prices combined with even a modest rise in interest rates will wreak havoc with the foreclosure rate.
That nervousness does create some buying opportunities (I’m a buyer right now) so I’m not saying we’re on the cusp of Armageddon, but I never consider the opinion of an industry group to be credible evidence of what’s really going on – they’re never objective.
I invest in residential properties from time to time, and I found a website that helped me out a lot. You have to pay for the reports, unlike other sites, but the thing about this is that the reports will tell you whether there is any funny business going on in the neighborhood like property flipping or a high rate of foreclosure. It’s helpful to me because I am not familiar with some of the neighborhoods that I invest in, so I know if I am getting screwed. The report tells me if there is any market sketchiness. It’s pretty sweet, you should check it out. www.homesmartreports.com
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