Monday, May 23, 2011

Mortgage Delinquencies by Loan Type

by Bill McBride on 5/23/2011 01:23:00 PM

By request, the following graphs show the percent of loans delinquent by loan type: Prime, Subprime, FHA and VA. First a table comparing the number of loans in Q2 2007 and Q1 2011 so readers can understand the shift in loan types:

MBA National Delinquency Survey Loan Count
 Q2 2007Q1 2011ChangeSeriously
Survey Total44,248,02943,729,247-518,7823,572,679

Both the number of prime and subprime loans have declined over the last four years; the number of suprime loans is down by about one-third. Meanwhile the number of FHA loans has increased sharply.

Note: There are about 50 million total first-lien loans - the MBA survey is about 88% of the total.

Prime Mortgage Loans Delinquent Click on graph for larger image in graph gallery.

The first graph is for all prime loans. This is the key category now ("We are all subprime!").

Since there are far more prime loans than any other category (see table above), over half the loans seriously delinquent now are prime loans - even though the overall delinquency rate is lower than other loan types.

Subprime Mortgage Loans DelinquentThe second graph is for subprime. This category gets all the attention - mostly because of all the terrible loans made through the Wall Street "originate-to-distribute" model and sold as Private Label Securities (PLS). Not all PLS was subprime, but the worst of the worst loans were packaged in PLS.

Although the delinquency rate is still very high, the number of subprime loans had declined sharply.

FHA Mortgage Loans DelinquentThe third graph is for FHA loans. The delinquency rate is declining, however this is primarily because most of the FHA loans were made in the last couple of years.

Another reason for the improvement was eliminating Downpayment Assistance Programs (DAPs). These were programs that allowed the seller to give the buyer the downpayment through a 3rd party "charity" (for a fee of course). The buyer had no money in the house and the default rates were horrible.

VA Mortgage Loans DelinquentThe last graph is for VA loans.

There are still quite a few subprime loans that are in distress, but the real keys going forward are prime loans and FHA loans.