Expect more Future Foreclosures from Prime Home Loans Comments Off
It’s now the Prime Loans that Represent the greatest increase in numbers of future short sales and foreclosures. I’m not an economist, but my guess is that we are seeing the increase in the Prime loans because of high rates of unemployment, and because of high number of underwater houses. This is causing the good credit, low risk borrowers to stop making payments which will lead to future US foreclosures and more homes that will be sold as Short Sales. Check out this information reported by the Inman news.
…prime loan total delinquencies were escalating, which was somewhat disturbing since other sources were reporting the housing market to be stabilizing.In February, the Standard & Poor's/Case-Shiller Home Price Index was reporting seven straight months of price gains. This good news was accompanied by numerous economists babbling that the price increases were “further evidence that conditions in the house markets continue to stabilize” and “people are realizing the bottom is creeping away.”Berg and his analytics partner thought those sentiments were a bunch of crap. According to Berg, there is a huge inventory of prime loans in delinquency and heading for the wrong side of the market.”We like to look at rates of change or velocity of deterioration,” says Berg. “If you look at a grouping of loans as prime, subprime, option ARM and FHA, you expect the prime group to have the lowest delinquencies, which is still the case, although prime loans reached 6.7 percent of total delinquency in the first quarter.”While that looks good for prime, one of the important things to take into consideration is total deterioration of the group. Using January 2005 a month of relative market stability as a base, prime loans have deteriorated 305 percent relative to total delinquency rates at the beginning of 2005. The surprise is that deterioration vastly outpaces subprime, which vaulted 230 percent, and FHA, which has been flat in terms of total delinquency.