About 14% of mortgages are delinquent or in foreclosure. Rates by state:
As CR notes:
This highlights a couple more points that Brinkmann made this morning: 1) the largest category of delinquent loans are fixed rate prime loans, and 2) this is not just a "sand state" problem. Brinkmann argued the foreclosure crisis is now being driven by economic problems as opposed to the bursting of the housing price bubble - and this is showing up in prime loans and all states. Although Florida and Nevada are very high, notice that the blue bar (new delinquencies) are higher in many other states.
Brinkmann is MBA's Chief Economist. He explains factors that are dragging down economic growth. Currently, US growth has been revised downward due to the Euro crisis. As the dollar has appreciated against the Euro, it has made our exports more expensive and less competitive. Additionally, while unemployment has leveled off, it still remains high. Strategic defaults are a clear trend:
Recent research, mainly from the credit bureaus, has also documented the increased incidence of "strategic defaults," where borrowers who could make their mortgage payments decide to pay other bills ahead of their mortgage loan, said Michael Fratantoni, MBA's vice president of research and economics. Typically, these are borrowers who owe more on their mortgage than the current market value of their home.
"If you look back three, four years ago, it was always the case where a borrower would pay the mortgage first before the second mortgage or credit card debt," Fratantoni said during a conference call with reporters. Today, for some groups of borrowers, that's no longer true. "It runs counter to what anyone would typically expect and the historical experience," he said.
Last week, Business Week reported that strategic defaults made up at least 12% of the defaults in February. Commercial real estate is also hurting. Bloomberg notes commercial property values have dropped in the biggest metropolitan areas, and are down 42% compared to their peak in Oct 2007. Bloomberg also reports that the Fed is in no hurry to sell off its mortgage backed securities. This last article is a good summary of the US's overall economic picture. Bottom line is the Fed expects:
“Even though the recovery appeared to be continuing and was expected to strengthen gradually over time, most members projected that economic slack would continue to be quite elevated for some time,” according to the Federal Open Market Committee report, which doesn’t identify the specific governors or regional-bank presidents making comments.
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