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Tuesday, August 23, 2011

Mortgage Delinquencies by Loan Type

by Calculated Risk on 8/23/2011 08:58:00 AM

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 Q2 2011 so readers can understand the shift in loan types.

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

MBA National Delinquency Survey Loan Count
Q2 2007Q2 2011ChangeSeriously
Delinquent
Prime33,916,83031,888,314-2,028,5161,839,956
Subprime6,204,5354,126,408-2,078,1271,102,989
FHA3,030,2146,467,9093,437,695529,075
VA1,096,4501,402,208305,75864,502
Survey Total44,248,02943,729,247-518,7823,536,521


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 increased in Q2 after declining for the last several quarters. Most of the FHA loans were made in the last couple of years.

Another reason for the previous 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.

All four categories saw a slight increase in Q2.

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

Yesterday:
MBA: Mortgage Delinquencies increased slightly in Q2
MBA Delinquency Survey: Comments and State Data
Mortgage Delinquencies by State: Range and Current