No Light Yet

It's getting harder and harder to find any rays of light in the quarterly MBA delinquency reports.

It is heartening to note that Federal Housing Administration overdues actually declined from the second to third quarter, by six basis points. But year-to-year, FHA delinquencies have increased by more than 100 bps, so there's not much comfort there.

Department of Veterans Affairs' loans continue to perform well, jumping just two basis points, to 8.08%, or just 124 bps above the prime rate.

The MBA numbers show quite clearly that it is prime mortgages that are taking their turn swelling the overdue rolls, following their subprime cousins down the drain. Prime overdues have almost doubled since the start of 2008, and have more than tripled since the start of 2005. Subprime overdues have jumped by just 40% since the start of 2008, probably because so many had already gone overdue before then.

It is sobering to consider how many more prime loans there are than subprime, which was still a minority of loans for all the publicity around them. MBA tracks 33.9 million prime loans currently, as opposed to 4.7 million subprime.

That's seven times as many potential problems (granted, many of the subprime loans created during the boom have been foreclosed on and removed from lenders' books.)

For the worst percentage performance, subprime adjustable mortgages still lead the way, with more than 40% 90 days overdue or in foreclosure. Florida leads the list of states, with more than 58% of subprime ARMs seriously delinquent, but second and third places, also both over 50%, may surprise you. They are not California and Nevada, nor any of the Rust Belt states, but rather New York and New Jersey.

Just 16.7% of prime adjustables are overdue, but again, a look at the numbers is revelatory as 16.7% of five million prime ARMs is 835,000 mortgages, while on the subprime side, 40% of 1.95 million is a little less than 800,000.

Looking at all loans, it is quite sobering to see that just two states have overdues below 5% (North and South Dakota).

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