But, you already knew this if you have been reading the blog. Jumbo Prime and Alt-A are under heavy pressure with month-over-month default rates that surged. These classes of borrowers and loans are highly susceptible to the negative-equity influences that are the leading cause for loan default among.
This is a major problem very few are factoring in when forecasting future events the housing market. Everyone thinks ‘subprime and done’. Nope! Subprime was the proverbial ‘canary in the coal mine’ to the great housing and mortgage implosion.
“NEW YORK, Aug 22 (Reuters) – Delinquency rates on many better quality U.S. mortgages last month outpaced those on the subprime loans that helped spark the U.S. housing crisis, Standard & Poor’s reports showed on Friday.
Total delinquencies on prime “jumbo” loans and “Alt-A” loans made in 2007 rose at a 7.3 percent and 9.12 percent rate, respectively, from June, the rating company said. These loans require less proof of repayment but were made to borrowers with credit scores above subprime. For subprime loans, the rate of delinquency rose 7.0 percent rate last month.”
Overall, delinquencies on 2007 prime jumbo loans rose to 3.22 percent in July, while Alt-A loan delinquencies increased to 14.56 percent, S&P said. Defaults on subprime loans from last year hit 31.25 percent.
The 2007 vintages are even worse than 2006 for two reasons: a) prices were at all time highs in 2007 so these borrowers are further underwater. b) underwriting standards fell apart in the first half of the year.
“Delinquencies on loans made in 2006 exceed those of 2007, probably because of the longer period from origination.
“The more recent vintages are suffering more performance related issues sooner, and to a greater degree,” Pollsen said.”
Best, Mr Mortgage
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