B&C Problems Creep Up
After registering an unexpected dip in the middle of this year, serious delinquencies and foreclosure rates on subprime credit quality mortgage loans have started rising again, according to LoanPerformance here.
The company, which maintains the industry's largest database about the performance of B&C loans, found that serious delinquencies on subprime loans climbed 10 basis points in September to 6.96%. Serious delinquencies are loans 90 days past due or more. Meanwhile, 4.17% of loans were in the process of foreclosure, up two basis points from a month earlier.
These are still below the peak levels for subprime delinquencies and foreclosures, according to LoanPerformance. Serious delinquencies peaked at 7.89% in February of 2002. At that time, 5.03% of subprime loans were in the foreclosure process.
"It does look like it's creeping back up again," said Sheila Meagher, vice president for market research at LoanPerformance.
Regionally, the Rust Belt states of Illinois, Indiana, Ohio and Kentucky continue to suffer high delinquency rates on subprime loans. In those states, and in Utah and Mississippi, more than 9.99% of subprime loans were more than 90 days past due or in foreclosure as of the second quarter, according to LoanPerformance.
Because collateral values are extremely important to the performance of lower credit quality loans, LoanPerformance has been tracking data about the possibility of a bubble in home prices.
Michael Youngblood, a
consulting economist at LoanPerformance, wrote in a recent article for the company's Market Pulse newsletter that the question about a home price bubble arises because of the symmetry between house price gains and stock market declines since stocks peaked in the summer of 2000. Stock prices have fallen by over 20% since then, but home prices rose by nearly 27%.
After evaluating market data from 123 local housing markets, Mr. Youngblood has concluded that the evidence does not suggest there is a widespread, national housing bubble. But he says there are bubbles in as many as 20 local markets. Those markets represent about 18% of the U.S. population.
Areas where Mr. Youngblood's testing suggests a possible bubble in prices include Boston, Denver, Miami, San Diego and Nassau County in New York.
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