May 19, 2007

FLASH: OC Register exposes that true subprime ARM default rate is 21.1%, NOT the 13% reported in MSM

Every day it seems another REIC lie is being being exposed. Watch the floodgates really open up now that the MSM has jumped off the REIC tank, put down the rolodex of realtors, and is (finally) doing their damn job.

Bravo to Mathew Padilla at the OC Register. Keep digging! Especially when it comes to the bigger story of Alt-A liar's loans. With 60% of applicants on those loans committing blatant mortgage fraud by overstating their income by 50% or more, that disaster will unfold soon enough. Plus the feds should review every liar's loan taken out and prosecute every one of 'em for mortgage fraud.

Subprime delinquencies higher than reported

Forget that 13% subprime delinquency number you heard about so much in the press and which some politicos and real estate folks turned on its head pointing out 87% of subprime borrowers are paying their mortgage.

I took another look at the transcript from the first-quarter conference call of IndyMac Bancorp, and caught this statement from CEO Michael Perry:

On subprime loans, one of the things that I think people aren’t aware of is that the Mortgage Bankers Association basically classifies the lender as a prime lender or a subprime lender. So for example, they classify IndyMac and Countrywide as prime lenders, and they classify New Century or whoever as a subprime lender. And all of their servicing portfolio is considered prime or subprime for the MBA. Ok? And so when you see that delinquency number in the press of 13% subprime delinquencies, it’s hugely understated. It is absolutely hugely understated. And the prime delinquencies are overstated.The subprime delinquencies are more like 18, 20, 22% delinquencies and that’s where I think you’re going to see the problems."

To see if Perry had it right, I quizzed the MBA and got this in response from Jay Brinkmann, vice president of research and economics:

"Mr. Perry is correct that we have to differentiate by the type of servicer rather than the type of loan. This may not be a major issue because our latest subprime numbers are 14.4% delinquent by at least one payment, plus another 4.5% in foreclosure, for a total of 18.9% either delinquent or in foreclosure.

For just subprime ARMs that number is 21.1%, so we agree with Mr. Perry's estimates of the current state of the market."


Anonymous said...


Anonymous said...

21% of those loans people just stopped paying. That's a lot of failed flippers!

Mort said...

20+%, that's just for starters. Wait 'til those ARMs start readjusting. I know that I, were I a poor victimized borrower with no skin in the game, could easily walk away with no pangs of conscience. Those loans, like you say, like I say, like anyone with a modicum of self-respect or an ounce of pride, or half a brain says, aren't getting paid back, ever.

Anonymous said...

A mercedes dealer in seattle is advertising 0% fianancing for 72 months for new mercedes,but seattle is still special

Eman said...

Liar loans not getting paid back is no big deal; it's secured debt. That's the reason they were made in the first place, the reason the MBS were bought. The real issue comes when the true security of that debt, which is based on pesky real incomes, tries to ride the shoulders of a skittish credit market in full pendulum retraction mode, during a recession.

Paul E. Math said...

To me, it's a good sign that 21% of subprime borrowers are getting out of those toxic mortgages, one way or another. They are making a rational descision to stiff the lender who conned them into a bad deal. I consider this a great success for rational thought.

They should not be whining about 'losing their homes' but rather wiping their brows in relief as they move their stuff into a larger, better home with a lower monthly rental payment.

Anonymous said...

People will sell their first-born before they give up their home.

J-Dog said...

For those who took out liars loans, how about the IRS sending a tax bill for the difference between what they stated on their loan and what they reported on their tax return. Wouldn't one round of that pretty much end this scam.

Frank said...

Props again to the OC Register. They ran a story way back in August of last year on how it's cheaper to rent than buy. They're way ahead of the rest of the MSM on this.