Quote of the Day

"The next six months, the industry, all of the folks that are out there trying to solve this problem, they are going to be very busy. There are a lot of people facing their resets right now. A good share of them don't have the refinance option." - Mark Fleming, chief economist for First American CoreLogic, a California research firm.  (Washington Post, July 1^st)

Subprime Mortgage Trends

Resets Peaking On Subprime Loans.  “First American CoreLogic, a California research firm: Nationally, the number of subprime adjustable-rate loans resetting peaked at 7.61% of the loans outstanding last month. More than 300,000 such loans will adjust this summer. .. The timing reflects the height of subprime lending in the summers of 2005 and 2006, when many borrowers secured loans scheduled to adjust in two or three years... CoreLogic's data covers about 80% of the mortgage market."  (Washington Post, July 1^st) 

Wachovia Halts Negative Amortization Mortgages.  “Wachovia Corp. said Monday that it won't offer mortgages with negative amortization features anymore, one of the main types of home loans offered by Golden West, the mortgage giant the bank acquired for $24 billion roughly two years ago. Wachovia (WB) also said it's waiving pre-payment penalties on its so-called Pick-a-Pay mortgages, which allow borrowers to choose between several different monthly payments. The lower payment options increased the total amount owed on these mortgages, which is known as negative amortization.”  (MarketWatch, June 30^th)

Homeowners Fall Further Behind on Mortgage Payments.  “Newly delinquent homeowners outnumbered those who caught up on overdue payments for a 26th straight month in May, according to trade group Mortgage Insurance Companies of America, that tracks loans to people who put down less than 20%. In the worst housing slump since the Great Depression, 67,967 homeowners with mortgage insurance fell at least 60 days behind on their loans, compared with 40,687 who got back on track. Borrowers who take on debt of more than 80% of a home's value are often required to buy coverage that pays lenders if they default.”  (Bloomberg, June 30^th)

Subprime, Alt-A Bonds to Extend Drop as Banks Limit Purchases.  “JP Morgan Chase: Subprime and Alt-A mortgage bonds, trading at or near record lows, may continue their declines as banks limit purchases of some securities and are forced to sell off what they hold. Prices for typical fixed-rate Alt-A bonds rated AAA have tumbled to near an all-time low of less than $84 per $100 of principal from about $87 in April. Subprime debt is also down, benchmark Markit ABX indexes show, as AAA bonds lost 5.1% in three months, Lehman Brothers Holdings Inc. index data show. A year after the subprime meltdown roiled credit investors, the market for new non-agency mortgage bonds is no closer to reopening.”  (Bloomberg, June 30^th)

For Conn., Report Says, More Subprime Problems.  “Connecticut Governor’s subprime task force: New figures show the state has 77,000 active subprime mortgages totaling about $17 billion. Of those, about 15%— or 11,550 loans totaling $2.5B— were seriously delinquent and headed for foreclosure as of Dec. 31. That compares with an earlier report showing Connecticut had 71,000 subprime mortgages totaling $15B, with about 8%— or 5,680 totaling $1.2B— that were seriously delinquent as of March 31, 2007… [Also,] two-year, adjustable-rate, subprime mortgages will continue to reset to higher rates through H1’09. Previously it was forecast that the resets would wind down by the end of this year.”  (Hartford Courant, June 28^th)

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