Posted on April 21st, 2008 in Mr Mortgage's Personal Opinions/Research
YouTube Video Link – http://www.youtube.com/watch?v=3NOHJPxGGlk – S&P, BofA and Fitch all concur that the ‘Home Equity Implosion’ is knocking on, or kicking down rather, the front door.
The delinquency and default crisis with Home Equity Lines/Loans will only grow from here. It is the ‘negative equity effect’ in full force…many people just will not continue to pay for a massively depreciating asset, especially in cases when the first mortgage may be an exotic where the payments are increasing!
The update from S&P below came out this morning. On its own it doesn’t say much unless you track such things. But when combined with what BofA said in its earnings call this morning and with what Fitch said last month about big banks deadly home equity exposure, it provides a clear path to where all of this is headed – home equity lines/loans are right up there with the Pay Option ARMs as being the next big ‘implosion’.
Our nations largest banks holds the majority of these loans. Click the links below and it will all become clear.
Consumers…there maybe relief for you coming soon if you have a home equity loan!
BofA Earnings Call Excerpts…
“Credit quality in our consumer real estate business mainly home equity deteriorated sharply. The problems to date have been centered in higher LTV home equity loans. Our largest concentrations are in California and Florida [40% of portfolio]. 82% of the net charge offs related to loans where the borrower was delinquent and had little or no equity in the home. Loans with the greater than 90% CLTV on a refreshed basis currently represent 26% of loans versus 21% in the fourth quarter. We believe net charge offices in home equity will continue to rise given softness in the real estate values and seasoning in the portfolio. Two issues that is playing home equity and could drive losses are a prolonged deterioration in home values and further deterioration in the economy.”