Some subprime mortgage loans are actually current
You really can't go more than a day without another headline talking about doom and gloom for the housing industry and the lenders. "Foreclosures up 75% for the last quarter" does not mean that 75% of all home have gone into foreclosure, it just means that 75% more homes went into foreclosure than the year before. As I said the other day when writing a post about the latest government efforts to help troubled borrowers, 10.3 homes per thousand is a foreclosure rate of 1.03% for the United States or put another way, 98.97% of all homes have not gone into foreclosure. Similarly, not everyone who has taken a subprime loan in the past few years has stopped making payments and mailed their keys back to the bank, some subprime loans are actually current.
There certainly are a few homes in foreclosure and others where the seller owes more to the lender than the home is worth and can't bring any money to closing because he/she/they don't have any (short sale). Whether it was a prime loan or a subprime loan and whether the seller either refinanced and took all the equity out of the property and bought a flat screen TV, a new car or took a vacation or they simply don't have the money to stay current on their loan, the bottom line is that not all loans are delinquent.
Tom Brown writing at Seeking Alpha said, "I am continually surprised by the overgeneralized predictions about eventual subprime mortgage credit losses lately being thrown around by people who ought to know better ... In fact, it’s possible to subject these back-of-envelope predictions of Armageddon to a reasonableness test. How? By looking at the actual credit performance of individual mortgage-backed securities issued as the subprime market began to crack up."
Please read, "Some subprime mortgage loans are actually current". You may be surprised.