The Mortgage Bankers Association’s figures on home loan performance just keep getting worse and worse. Here is what things looked like in Q3 2009:
* The overall mortgage delinquency rate surged to 9.64% in Q3 2009 from 9.24% in Q2 2009 and 6.99% a year earlier. Once again, this is a fresh record high for the data series, which goes back 37 years. For some historical perspective, the recent low for the delinquency rate was 4.31% in Q1 2005.
* Breaking it down by loan type, the subprime DQ rate rose to 26.42% from 25.35% a quarter earlier and 20.03% a year earlier. The prime-only DQ rate climbed to 6.84% from 6.41% in Q2 2009 and 4.34% a year earlier.
* And how about the “new subprime” behemoth — the Federal Housing Administration? Delinquency rates there continue to march higher, rising to 13.9% from 13.62% a quarter earlier and 12.27% a year earlier. That’s the worst FHA credit performance in U.S. history. The increase occurred despite a large increase in the overall number of FHA loans, which should lower the delinquency rate, all else being equal.
Like I said last quarter, the FHA program has become the “go to” place for borrowers who previously might have taken out subprime or Alt-A loans. By keeping lending standards incredibly lax (3.5% down payments anyone?) FHA is playing with fire. Grab your wallets taxpayers!
* The percentage of mortgages entering the foreclosure process resumed its climb, rising to a record high of 1.42% from 1.36% a quarter earlier. The overall percentage of mortgages in any stage of foreclosure climbed to 4.47% from 4.3%. Just over 14 out of every 100 loans in the U.S. are now distressed in one form or another, the most ever.
* Regionally, delinquency rates were still the worst in Mississippi at 14.4%. Nevada was a close second at 14%, followed by Georgia at 12.93% and Michigan at 12.64%. Florida had the highest percentage of loans in foreclosure at 12.74%, followed by Nevada at 9.44%.
Lousy mortgage performance continued into the third quarter. Both delinquency and foreclosure rates rose to new all-time records, with deterioration virtually across the board. The FHA loan program is now joining the Alt-A and prime markets in the woodshed, which just goes to show how silly it is to maintain lax lending standards in the midst of the worst housing downturn on record. Even the CEO of home builder Toll Brothers, Robert Toll, yesterday called FHA “a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.”
Going forward, aggressive modification programs and a nascent stabilization in the housing market will eventually lead to a turn in performance ratios. But this process will play out with a lag. And it goes without saying that nothing can change the fact we binged on real estate as a country … and now we’re paying a heavy price.
{ 5 comments… read them below or add one }
I’m so shocked at the numbers (Not!). Who could have seen that one coming?
Like I have been saying all along, we need to find something else to base our economy on other than housing. It may sound cruel, but a lot of people were not meant to be homeowners. And with unemployment getting worse and even underemployment, I see no end in sight to the dismal numbers.
Since FHA and shady mortgage brokers are currently monetizing the “tax credits” and there are still people with shoddy credit putting ZERO down on homes destined to lose value, how can a sane person think we have found a bottom?
If 1/2 the stuff coming out of Washington costs 1/2 as much as expected, how on earth are people going to continue paying their mortgages and local taxes? Blood from a turnip comes to mind.
As for the forced modifications, once again the only real winners are the banks (lots and lots of fees and other money flowing) while the rate of foreclosures on modified loans continues to skyrocket.
Mike, I always appreciated your excellent insight. I am curious as to whether you think we are creating another housing bubble with all the assistance to first time home buyers and the newer assistance to existing home buyers? Isn’t this just more of the same being piled on a smouldering heap of dung?
Mike– I hope you are beginning to modify your analysis that we have “already seen a bottom” in the housing market? Now it is getting insane again. This time the Fed is insane as we all know. 3% FHA loans. 0% VA loans. And a full 50% of ALL mortgages for recent sales going to the Fed. $1.2 trillion and counting!
It is an insane situation creating artificial demand. Basically we are giving away houses again for free thanks to Obama. The culprit this time is the Fed not the banks.
If you are not changing your outlook on housing, I’ll be very surprised.
And Mike, this is not even counting the endless empty residential towers all over our country in every major (and minor) city. Those commercial projects have not even hit the fan yet. Am I missing something when I keep hearing you, “called a bottom?” Thanks. –Michael
Mike Larson Reply:
November 23rd, 2009 at 12:33 PM
Er … no. Witness the latest existing home sales report, which showed improvement across several metrics. The housing bust earthquake is over. Doesn’t mean we won’t have aftershocks from time to time in some markets. But to expect a renewed all-out disaster is not a wise strategy, in my book. See my most recent blog post on housing for more details.
Mike– The numbers are bogus. But you probably already realize this. There are now Floppers, Flippers, and Investors…and some (I agree) homeowners who are getting their houses for free again. And even those homeowners are putting money in their pocket after Treasury gives them their $8,000 check.
The Fed owning/controlling 80% of the $13 trillion residential market mortgages, are pumping it up with their monopoly play money that was printed on the Fed copy machine. Just to make Americans feel happy!
Regarding Floppers… Do you think this counts as a triple sale on a single deal? The bank does a short sale (Sale 1), the Flopper picks it up (Sale 2) and then turns it over to an investor (Sale 3). Maybe it’s good for a triple sale statistic to make everyone happy. Has anyone looked into this?
Maybe we double and even triple counting foreclosures and short sales? I don’t know. Just a suggestion.
Anyway the numbers may look good but I think they are phony. It is just another bubble speculation thanks to Bernake and his good friends Obama and Geither.
If it blows up, don’t worry…. we can print another $1.2 trillion to mop up the mess. Maybe $2 trillion because of the commercial mess coming up. –MichaelM