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!

Standard & Poors Home Equity Update Released Today

Download FITCH_HOME_EQUITY_WOES.2008.03.14.pdf

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.”

14 Responses to “HOME EQUITY LOAN DELINQUENCIES SURGE…S&P, BofA and Fitch Concur”

  1. Those delinquency numbers are scary. Can the FED take HELOCs at the auction windows in exchange for treasury bills?
    You’re the greatest Mr. Mortgage. Thanks for shining the light into the dark corners.

  2. How can the Fed take these as collateral? Look at the performance of these HELOCs. Cash flows for these will end up being nil.

  3. Did you note the BOE is now taking crappy mortgages in exchange for good pound sterling gummint backed paper?

    Of course they’re claiming the collateral “swap” is “quality mortgatges” although I don’t know why a bank would want to get rid of it’s good mortgages?

    They’re starting “small” — only $100 billion pounds to begin! LOL!

  4. collateral swap – just like shit the Fed is swapping for t’s over here. ‘Investment grade’ is down to BBB-. They are likely worth 10 cents on the dollar.

  5. Massive put positions on WFC, BAC and C.

    Pathway to serious riches.

  6. I’d gladly pay 10 cents on the dollar for my mortgage, but I already offered 85 cents and they wouldn’t take that. Nonetheless, they’re willing to short sell it for 60 cents and that goes down weekly.

  7. I’d gladly pay 10 cents on the dollar for my mortgage, but I already offered 85 cents and they wouldn’t take that. Nonetheless, they’re willing to short sell it for 60 cents and that goes down weekly.

  8. http://www2.tbo.com/content/2008/apr/19/na-forced-to-give-up-condos/

    In Florida, condos are going back to apartments. We sold our place and then moved into an apartment in the Tampa Area because we knew what was coming, than they converted the apartment we were in to condos… wanted us to buy and they were pushing interest only loans. We laughed the whole time, we moved out… they said they were going to give us a deal since we were already in the unit. Well, the units are already going for 20% less. Now you could be forced to sell at a loss even though you are not in foreclosure.

  9. Actually it looks like the condos were in are selling(asking) for 25-30% less than the DEAL? they were going to give us just 18 months ago. What a deal.

    I would suspect they are still very much overpriced, plenty of units available. Quite sad you could be forced to loss money, how would that work with a mortgage??

  10. Short WFC BAC C are great plays in my opinion. Condo’s in FL are not. haha.

  11. […] Mr Mortgage – Home Equity Delinquencies Surge – BofA and Fitch Concur […]

  12. […] Home Equity Delinquencies Surge – S&P, BofA and Fitch Concur […]

  13. I love your site. I found your blog via Google while searching for mortgage vs home equity loan and your post regarding HOME EQUITY LOAN DELINQUENCIES SURGE…S&P, BofA and Fitch Concur looks very interesting to me. It really looks very nice. The articles provided are long enough to provide great content but not so long as to be totally engrossing, if you know what I mean.

  14. When one company buy the loan form the other do they pay only the loan value are do they pay the loan value puls some part of the Estimated part of the 30th years of interests for example a loan for $92,000.00 US is sold for the $92,000.00 plus some part of the 5% interests over the 30th years. Please give me more information on this if you can.
    Thank you

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