Oil Spill May Intensify Problems for Troubled FL Borrowers

Struggling homeowners in Florida will have limited ability to face any additional economic challenges brought on by the Gulf oil spill, according to Fitch Ratings. A recently completed study by Fitch shows that half of all securitized nonagency mortgage loans in Florida are 60 days or more delinquent. Also among the study's more notable findings, "Florida already ranks the worst among all states in mortgage delinquencies across all product types,'" said managing director Roelof Slump. "The state contains a disproportionate amount of nonprime loans, with 85% of loans being categorized as Alt-A or subprime." On an aggregate basis, 81% of all loans in the state are "underwater", and the average mark-to-market loan-to-value ratio of Florida loans is 138%. Nearly 40% of all Florida borrowers owe more than 150% of the value of their homes, said Slump. Although half of all borrowers in the state are current on their mortgage payments, they owe 120% of their home values. "Given the significant negative equity, further economic stress brought on by the Gulf oil spill and declines in the tourism and fishing industries would be likely to further increase default rates," said Slump. Fitch said it is monitoring Gulf Coast areas for possible after-effects of the oil spill on MSAs dependent on the fishing and tourism industries. Following a trough of 3% in the summer of 2006, the state's unemployment rates steadily rose to a peak of 12.3% in February 2010 before recovering to the current rate of 11.2%.