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Saturday, February 16, 2008

Georgia Loan Problems Outpace Florida

by Calculated Risk on 2/16/2008 04:13:00 PM

From Joe Rauch at the Atlanta Business Chronicle: Georgia loan problems worst in Southeast. (hat tip Edward)

A few excerpts:

Georgia banks reported the highest number of problem loans, with 4.74 percent of banks' loans either past due or foreclosed, the highest level of any state in the Southeast, according to data prepared by FIG Partners LLC.

That figure is a sharp increase from 3.26 percent, the figure reported at the end of third-quarter 2007.
Florida's banks reported a 3.26 percent default rate. That dwarfs Georgia's other immediate neighbors such as North Carolina at 1.82 percent, South Carolina at 2.16 percent and Alabama at 3.46 percent.
Metro Atlanta has an especially serious problem, with defaults reaching 6.54 percent of "local banks' balance sheets" in Q4 2007. There is also a 5 year supply of undeveloped lots in metro Atlanta (146,000 lots):
"Lot loans are the prime concern for us," said [Rob Braswell, commissioner of the Georgia Department of Banking and Finance, the primary state bank regulator]. "Developers are having a difficult time carrying these lots and we don't want banks to get into the real estate business."
Why is Georgia, and especially Atlanta, seeing so many defaults?

Case-Shiller House Price Index Click on graph for larger image.

For the most part, Atlanta didn't participate in the price boom. This graph compares the Case-Shiller house price index for Atlanta and Miami. Although prices rose much quicker in Miami, and are now falling faster, Atlanta has a higher percentage of loans in default.

One reason might be that Georgia led the nation in Interest Only loans. Another might be that lenders are able to foreclose quicker in Georgia: From the NY Times last July: Increasing Rate of Foreclosures Upsets Atlanta
Despite a vibrant local economy, Atlanta homeowners are falling behind on mortgage payments and losing their homes at one of the highest rates in the nation, offering a troubling glimpse of what experts fear may be in store for other parts of the country.
A big reason the fallout is occurring faster here is a Georgia law that permits lenders to foreclose on properties more quickly than in other states.
Although different markets will experience different dynamics (probably fewer homeowners are upside down in Atlanta compared to Miami), this shows that loan problems are occurring almost everywhere.