Mortgage/foreclosure mess just getting started

[southoctracker_IHB]

<p>Some interesting quotes from <a href="http://latimesblogs.latimes.com/laland/2007/10/trouble-ahead-2.html">a post at the LA Times real estate blog today</a>:</p>

<p>"The current foreclosure wave is being fueled by loans made in 2005 and 2006; these new studies signal that 2007 loans were just as poorly underwritten -- perhaps worse -- and will keep the foreclosures coming for quite a while."</p>

<p>"Another aspect here is pretty troubling: when loans made in late 2006 or 2007 are already going bad, it's hard to blame the terms of the loan -- misleading teaser rates, adjusting interest rates, payment shocks, etc. -- these appear to be <strong>borrowers who couldn't afford the initial payments, let alone the resets."</strong></p>

 

[IrvineRenter_IHB]

It would be interesting to know the volume numbers. The subprime spigot was turned off early this year, whereas it was on full blast in 2006.

 

[reason_IHB]

Personally, I think the "subprime spigot" was turned off around June/July. So the volume numbers might be high.

 

[southoctracker_IHB]

<p>Here's <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=a8Mzhz09jHP8&refer=home">a link to the Bloomberg article</a>, which has a little more in terms of numbers. As I am by no means a financial expert, I'd love to hear what others think this means for the market.</p>

 

[graphrix_IHB]

<p><img ismap="ismap" usemap="#map0" border="0" alt="" src="http://www.markit.com/cache/curves/5de9867dc9a04265710f89ebe1b.png" /></p>

<p>That is the ABX for the first half of 2007 on the lowest grade of subprime loans. I don't think the 2006 index got that low. I have already started to see 2007 loans at the foreclosure auction. I can look at the 2007 MBS deals and see how bad they are doing but I can't compare the rate they defaulting compared to 2006. I'm sure though it will be ugly. Any particular lender requests?</p>

 

[awgee_IHB]

graphrix - Yes, a few AAAs please. I know they are less dramatic, but I think they are a much better overall indicator of the trend in the credit market.

 

[graphrix_IHB]

<p>I will pick on Countrywide on deals that closed in 2/2007 and I will do subprime, ALT-A, option ARMS and AAA. </p>

<p>Subprime total delinquent 14.68% and 7.97% in foreclosure, BK or REO. Current pool balance $443.6mil. Yes it is getting worse because 3 months ago early 2006 vintages were this bad. </p>

<p>ALT-A total delinquent 3.39% and 1.05% in foreclosure, BK or REO. Current pool balance $921.9mil. I checked the prospectus and the average FICO score was 715 which is high for ALT-A. Also about 60% of this pool are loans from CA.</p>

<p>AAA total delinquent .88% and .18% in foreclosure or REO. Current pool balance $1.1bil but the original balance was $2.2bil. A 50% prepay rate is awful. It is no wonder the jumbo market tanked investors didn't even get a chance to make any money. About 40% of this pool are loans from CA and the average FICO is 744. </p>

<p>Option ARMs total delinquent 5.28% and 1.16% in foreclosure, BK or REO. Current pool balance $1.03bil. About 50% of the loans are in CA and the average FICO was about 710. This is scary because it proves our theory that people have loans where they cannot even make a payment that is less than the interest. </p>

 

[Trooper_IHB]

<p>Graphrix sez, <em>"Option ARMs total delinquent 5.28% and 1.16% in foreclosure, BK or REO. Current pool balance $1.03bil. About 50% of the loans are in CA and the average FICO was about 710".</em> </p>

<p>Geez, couldn't these people have gone jumbo fixed with that FICO ? The rates were still pretty low then.... I'm guessing most were flippers, figuring on a fast buck. SO sorry.</p>

 

[screwrealestate_IHB]

So am I reading this right that if we take option arms and subprime we are looking at 42% of loans being written? Unless I am missing another class of loan, thats not so good...

 

[lendingmaestro_IHB]

a good gredit score does not denote intelligence, it just means you haven't made a mistake yet. Well, thousands of prime borrowers got sucked up into the fake OC RE wealth phenomenon. I'm sure our buddy Slade Smiley was a prime borrower too, and so are all these flippers.

 

[IrvineCommuter_IHB]

<p>I just wanted to give Graphrix some props for his posting on the OC mortgage blog. </p>

<p>BTW: Jimmy reminds me of Mike Norman.</p>

<p><a href="http://mortgage.freedomblogging.com/2007/11/05/has-oc-turned-the-corner-on-foreclosures/">mortgage.freedomblogging.com/2007/11/05/has-oc-turned-the-corner-on-foreclosures/</a></p>

 

[lawyerliz_IHB]

Are Graphix and Graphrix different people?

 

[profette_IHB]

lawyerliz,

It's a jekyl and hyde thing with him...

 

[Trooper_IHB]

Liz, he's always Graphrix....but people spell the name wrong sometimes.

 

[IrvineCommuter_IHB]

Me spell good.