Jumbo-Loan Defaults Surge in U.S. as Recession Reaches Wealthy Homeowners

[marmar]

Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer (Update3)
By Bob Ivry


Feb. 20 (Bloomberg) -- Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest.

About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Florida. They got to that level within 10 months, almost twice as quickly as 2007 borrowers and the fastest rate since at least 1992, when LPS Applied Analytics began tracking the market.

The jump in late payments on jumbo loans, while still lower than the 20 percent delinquencies in subprime mortgages, signals that the borrowers with the most money and the best credit are hurting as the U.S. recession deepens in its second year. It also means these loans will be even more difficult to obtain and more expensive to pay off.

“The biggest influence in rising delinquencies is related squarely to the economy rather than poor underwriting,” said Keith Gumbinger, vice president of HSH Associates, a Pompton Plains, New Jersey-based mortgage research firm. “We are apparently all suffering to some degree. It’s certainly more severe for some but still, it’s pretty much widespread.”

U.S. joblessness reached a 25-year high in January while the unemployment rate in the financial industry rose to 6 percent from 3 percent a year ago. It jumped to 10.4 percent from 6.4 percent in the category of professional and business services, according to the U.S. Bureau of Labor Statistics in Washington. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601213&sid=ab4hyMC6aJf0&refer=home

[Uben]

1. Darn, that's a shame!

Now is the time when people with money make money. When money is short, prices come down, and those with cash to invest usually profit the most. Had these wealthy people saved their money instead of living beyond their means, they would be poised to make some really good buys and extend their wealth. When you live on the edge, it just takes a nudge to fall. Nudge, nudge, say no more!

[blondeatlast]

2. Good thing defaults & foreclosures only happen to "those" "bad" people,

not to the righteous and hardworking, eh, Wall Street? :nopity:

Do I REALLY need the sarcasm tag? I don't think so.

[lonestarnot]

3. Damn deadbeats! Ruining everything!

:sarcasm:

[madrchsod]

4. dam...i`m only 30 days behind....

i can`t imagine what the late fees these people are paying....

[Warren Stupidity]

5. In many metro regions 'jumbo' is near the 'median'.

Categorizing jumbo loans as loans on luxury homes is at the minimum sloppy reporting.

"Due to increased housing prices, there is a large increase in the number of jumbo loan applicants. Many consumers are becoming jumbo borrowers when buying a modest ranch or Cape Cod house; this option is no longer limited to high-end luxury residences."
http://en.wikipedia.org/wiki/Jumbo_mortgages

And the same article points out the same sort of lender shenanigans to get people into risky loans.

[FarCenter]

6. Buyers should consider not only the mortgage but the other homeowner expenses

Property taxes, insurance, heating, electricity, water, sewage, garbage, routine maintenance, and building a sinking fund for major repairs and improvements. Note that while your mortgage payment can be fixed, all of the above increase year by year.

You should put 25% down and then be able to afford a 15-year fixed mortgage comfortably taking into account all of the above.

[slackmaster]

7. Don't forget, every foreclosure is tragic

:hide:

[gratuitous]

8. This development should not be surprising

But consider that this gets media attention (and by doing so becomes a "real" problem a la Pinnocchio) when the 60-day delinquency rate hits 2.57%. That's over 97% still performing, but George Bush and the Republicans so thoroughly trashed the economy that even a minor tremor of less than 3% causes shaking all over the financial map.