Experts: Bad Credit Mortgage Storm Hasn’t Passed… Yet

The subprime lending sector still has another year of tough times ahead, according to coverage from MortgageDaily.com, a dominant source of online news for the mortgage industry.

Problems may be subsiding slightly, but one insider believes the industry’s bevy of recent bad credit mortgage loan problems could continue for at least another eight months and possibly longer.

“We have got another eight, nine, 10, 12 months of headwinds,” Countrywide Mortgage CEO Angelo Mozilo told the publication.

Noting that significant consolidation is already taking place, Mozilo said bad credit home loan lenders are now operating in the face of a challenging environment.

The past year saw adverse conditions throughout the industry, which included flat and inverted yield curve conditions, home price depreciation, slowing home sales, declining production volumes and pressure on credit quality.

His isn’t the only weak outlook.

“There could be some further weakening in the subprime sector,” the Mortgage Bankers Association said in a report last week.

Noting that delinquency rates for subprime ARMs rose to 13.22 percent in the third fiscal quarter, the group said that delinquency will probably peak by the end of this year, albeit at lower levels than in the past.

“This lower peak will come despite the change in the composition of outstanding loans, namely a larger portion of bad credit home loans.”

JPMorgan Chase recently sold off much of its subprime mortgage holdings.

“Subprime will continue to have problems,” JPMorgan CEO Jamie Dimon said last week at an investor conference held by Citigroup Financial in New York. “Losses are only going to go up, including ours.”

Continued weakness in subprime is expected, JPMorgan said.

“Overall [bad credit mortgage] loss severities have begun to increase and 2006 vintage delinquency is higher than 2005 and 2004 at similar loan ages.”