by Calculated Risk on 12/06/2007 02:21:00 PM

While we patiently wait for Tanta's analysis of the Freeze, here is a graph of the MBA mortgage delinquency rate since 1979 (hat tip Bill).

Click on graph for larger image.

This is the overall delinquency rate, and it is at the highest rates since 1986. As noted earlier this morning, delinquencies are getting worse in every category - including prime fixed rate mortgages - and getting worse at a faster rate in every category.

It seems like a long time ago, but it was in July of this year that Bernanke presented a report to Congress arguing that the subprime problems would stay in subprime, and that the problems were contained to variable rate subprime loans (see this post). Bernanke couldn't have been more wrong.

by Anonymous on 12/06/2007 01:39:00 PM

While we're all eagerly crowding around the teevee waiting for the Great Loan Modification Speech (can it get any nerdier than that? Can it? Sheesh) I want to comment on this little statistic, that is getting thrown around a lot:

Modified loans frequently re-default. Joshua Rosner at Graham-Fisher & Co. says 40% to 60% of subprime and Alt-A borrowers who have their loans modified end up defaulting anyway within the next two years. Fitch Ratings puts the recidivism rate at a slightly lower 35% to 40% for good modification programs.

Let us bear in mind that such statistics have to be based on loans that were modified no more recently than 2005 (newer mods would not have a 24-month post-modification history). It is quite possible, indeed it is likely, that modifications done in 2005 and earlier (when there were many more refi opportunities and most borrowers could sell their homes for at least the loan amount) were done for borrowers with problems like job loss or illness that either simply recurred or that created other (non-mortgage) debt problems down the road.

This is not to argue that modifications done now for loans originated in 2005 and after would perform better. Or worse. Or the same. It is to say that we are probably in uncharted territory and that "past history" was a lousy guide when we made the loans and might be a lousy guide when we have to work them out.

Furthermore, 40-60% is a very big range. In the absence of other information, I would certainly guess that most if not all of that variation is due to servicer quality, not borrower quality. If that is true, then performance of modified loans can be improved by something that is well within the control of the industry.

Now you can go back to waiting around the teevee . . .

by Calculated Risk on 12/06/2007 12:14:00 PM

The Fed released the Q3 Flow of Funds report today.

Homeowner equity declined by $128 Billion in Q3 as appreciation slowed (why didn't assets decline?) and equity withdrawal was still strong.

Homeowner percent equity fell to a record low of 50.4% (this includes the almost 1/3 of homeowners with no mortgage). I'll have more this afternoon.

by Calculated Risk on 12/06/2007 12:11:00 PM

Mr. Bush speaks at 1:40PM ET. Mr. Paulson at 1:45PM. Tanta at 2:00PM.

OK, I'm just kidding about Tanta, but I'm looking forward to her comments.

by Calculated Risk on 12/06/2007 10:07:00 AM

The MBA is reporting today (no link) that mortgage delinquencies increased sharply in Q3 2007. A few data points:

Total, 1-4 units delinquences increased to 5.59% from 5.12% in Q2.

Prime increased to 3.12% from 2.73% in Q2.

Subprime increased to 16.31% from 14.82% in Q2.

Delinquencies and foreclosures increased for every category, including prime fixed rates.