Subprime, Alt-A Mortgage Delinquencies Rising

Posted under Foreclosures, Housing Bubble, Recession by Darren Hom

Here’s an article on the rising delinquency rates of subprime and Alt-A mortgages. Things continue to get worse. Worse is better for people who invest in distressed paper and properties.

Delinquencies for Alt-A mortgages rated between 2005 and 2007 are climbing, with total delinquencies rising as high as 17 percent in some cases, more than 6 percentage points higher than previous estimates, the ratings agency said in a report.

Alt-A mortgages are considered higher-quality than subprime ones because Alt-A borrowers have high credit scores, often better than 700. However, most of these loans were made with little or no documentation of the borrowers’ income. Now the market is beginning to show what a risk these loans really are.

Lower-quality subprime mortgage delinquencies soared as high as 37 percent for mortgages originated in 2006, 4 percentage points higher than previous estimates, S&P said.

Subprime mortgages originated in 2007 saw delinquencies climb to almost 26 percent, 6 percentage points higher.

That’s a staggering delinquency rate. Banks’ loss mitigation departments are overwhelmed and understaffed.

“The 2007 issuance year continues to be the worst-performing vintage in terms of cumulative losses,” S&P said, regarding subprime mortgages. “Serious delinquencies” of payments 90 days late or more and foreclosures also are rising, S&P said.

Things may be bad now, but the Alt-A crisis hasn’t even fully begun. The housing market is going down before it comes back up.

Investors who are prepared for this will profit. Everyone else will get slaughtered.