Prime mortgages going bust at an alarming rate

[eridani]

http://www.mcclatchydc.com/2010/05/19/94464/prime-mortgages-going-bust-at.html#ixzz0oSL7YPOv

Aftershocks from the nation's financial crisis continue rumbling through the housing sector as fixed-rate mortgages held by the safest borrowers accounted for nearly 37 percent of new foreclosures during the first three months of this year, the Mortgage Bankers Association reported Wednesday.

Additionally, more than one in 10 homeowners were behind on their mortgage payments in the first quarter — a record, the association said. That's up from 9.47 percent in the last three months of 2009.

Prime loans, those made to the safest borrowers with the highest credit scores, account for almost 66 percent of outstanding U.S. mortgages, so their rising foreclosure numbers are troubling.

"People with higher scores are defaulting at rates we have not seen in the past," said Jay Brinkmann, the chief economist for the trade group.

The slide into foreclosure of the strongest borrowers is partly a function of the nation's unemployment rate, which is now 9.9 percent. The Great Recession has mowed down white-collar and blue-collar workers alike.

In the first quarter, almost 21 percent of foreclosure starts were for adjustable-rate mortgages held by credit-worthy borrowers. Fixed and adjustable-rate prime mortgages combined accounted for more than 57 percent of all new foreclosures.

[AllentownJake]

1. No job, no mortgage payment

really a simple idea.

[ProdigalJunkMail]

4. it's not rocket-surgery...you're dead on!

and the reason we're seeing them bust late in the game is that a lot of these people had nest eggs that they have raided to keep things afloat while waiting...and now the nest eggs are running out...but the jobs have not returned...

sP

[AllentownJake]

5. Yep and without the push forward demand programs

Housing prices will continue to decline in overbuilt areas that don't see a return to substantial job growth.

Not really rocket science. Now I can make a whole bunch of charts to confuse you on this showing why that isn't true, but than I'd be a professional economist.

[Lerkfish]

8. why do you hate Obama?

just being sarcastic.

The larger than life unemployment (in my estimation closer to 20% than they let us know) is the elephant in the room.

[AllentownJake]

11. The fact that there is no long term solution being discussed

When even by their rosey estimates things won't return to "normal" till 2014, is the most telling thing.

Stimulus bills only create jobs till the federal funding dried up. If the underlying private demand has not returned and tax revenues do not return to the states, all jobs created are lost.

[Lerkfish]

12. exactly what I've been saying all along: there is no apparent mechanism for sustained growth

[AllentownJake]

13. As Brian Williams said on Letterman of all places

The world is broke and the emperor has no clothes.

[SoCalDem]

2. A "good" credit score goes BAD in a hurry

if you lose a job or get your hours cut way back, or have to take a pay cut.. or your boss says MOVE, and you cannot sell the house you have, but your job depends on you moving within X number of weeks.

and remember.. those "prime" loans were made for grossly inflated housing prices, so evwn though the loan may have been prime, the house is no longer prime..

People making payments on a $300K loan for a house that's now worth $200K, may be thinking about how they are chumps for continuing..especially if they do not plan to make that their forever-house

[AllentownJake]

3. I don't even think we have begun to see the strategic default storm

I think a majority of these problems are related to the unemployment problems. When people realize the housing values are not returning and they owe 20%-30% more on a house that they don't have that much equity in, households that are not emotionally tied to the residence will start making business decisions.

In today's economy, where businesses tend to do lay-offs and moves rather frequently, owning a home seems like a bad deal.

[girl gone mad]

9. Which is why trying to prop up asset prices..

was never wise economic strategy.

[AllentownJake]

10. Who said they were ever thinking long term or even moderate term

They were trying to give their friends time to ready themselves for what was coming on their balance sheets while the sheep peacefully grazed.

It was a short-term fix hoping to not become overwhelming before an election cycle. Not that the other guys plans were any better.

[Dappleganger]

6. A new wave should hit this summer...

how much worse it will be due to job losses, more underwater mortgages and strategic defaults is unknown but will surely make an impact.

[marmar]

7. The economic pig really has run out of lipstick.....

nt

[ixion]

14. As reported by Dr. Housing Bubble

the next wave of resets has already started, and will be bigger than the 2008 peak, because it includes Alt-A and Option ARM prime rate loans, as this article describes.

Look for it to get much, much worse, despite all the (bs) talk of recovery.

http://www.doctorhousingbubble.com/get-over-it-because-there-will-be-no-housing-boom-this-decade-%E2%80%93-5-factors-that-will-drag-housing-down-in-the-next-ten-years/

[mdmc]

15. I have two friends that are going through foreclosure..