Home Mortgage Delinquency Rates Hit Four-Year High
The Chicago Tribune reports that the delinquency rate on residential real estate loans climbed last quarter to the highest level in four years.
The share of home mortgage loans on which payments were at least 30 days overdue rose to 2.11 percent, the highest since the fourth quarter of 2002, from 1.72 percent the previous three months, according to data posted on the Federal Reserve’s website today.
The data aren’t adjusted for seasonal patterns.
The deterioration in credit quality comes in a period of sustained gains in employment and incomes, a sign that weaker underwriting standards, not economic stress, may be to blame.
Federal Reserve policy makers this year have repeatedly said that many of the mortgage losses were concentrated in subprime (or bad credit mortgage) loans, traditionally designed for lower-income borrowers.
“The issue here is whether this is a story confined to a small portion of the housing sector or if this is something that becomes a broader macroeconomic story,” said Brian Sack, a former Fed economist who is now a vice president at Macroeconomic Advisers LLC in Washington.
“Some households are in trouble.”
The increase in bad credit home loan delinquencies caused at least 20 mortgage lenders to go bust, scale back or sell themselves in the past five months.
The risk of owning bad credit mortgage loans jumped to a record for an eighth day today, according to investors and financial experts.
Subprime home loans are given to people with poor or limited credit records or high debt burdens and typically have rates at least 2-3 percent above safer prime rate loans.
These bad credit home loans made up about a fifth of all mortgages last year, according to the Washington-based Mortgage Bankers Association.
In other parts of the housing market, there is evidence supporting Fed officials’ views that the mortgage and housing industries are stable.
The National Association of Realtors said today that sales of previously existing homes rose more than forecast in January to the highest in seven months, giving home to many in the industry who hope that a home loan rebound looms in the not-too-distant future.
SOURCE: Chicago Tribune