Is every house in America headed to foreclosure or is the bark worse than the bite
The headlines are bleak and you might think that every house in America was headed into foreclosure. According to an article by Reuters, the rate of home loans in foreclosure rose to a record high in the second quarter of 2007.
The Mortgage Bankers Association said 0.65 percent of loans entered foreclosure. That is only 2/3 of 1 percent. Delinquency rates on subprime loans rose to 14.82 percent but when you read the article, if you aren’t careful, you might think that all 14.82 percent of those are in foreclosure while what it really says is that as more loans become delinquent, foreclosures have increased.
Interestingly, while the National rate of failed loans continues to rise, the problems are concentrated in several of the states that saw the largest price gains including California, Florida, Nevada and Arizona. The National rate actually declined excluding those four states.
Some other bright news was tucked into the article. Delinquencies "have gone up, and that's expected," said Dan Seto, senior economist at Sumitomo Mitsui Asset Management in New York. But "they haven't gone up to the degree that the markets have priced in. These are not disastrous numbers." Douglas Duncan, chief economist for the Mortgage Bankers Association noted that loans to strong borrowers in fixed-rate mortgages continue to perform well even as subprime and adjustable-rate loans slide. "The seriously delinquent rate for prime fixed-rate loans was essentially unchanged from the first quarter of the year to the second," Duncan said in a statement.
Please read the article but read it carefully, the bark is worse than the bite.
UPDATE: I just noticed a similar but better story on Marketwatch, well worth the read. Click here.