Report: 2.2 Million Subprime Borrowers Face Foreclosure

[Anonymous]

I must disagree that ‘The homes the sub prime buyers purchased tend to be in less desireable areas.’ As a lender, I have clients who purchased in very upscale neighborhoods. In fact, except for a few condos I cannot recall a single purchase/loan is a ‘less desireable’ location.

[PerryChase]

OK, I had a break and re-read the posts. powayseller posted about a NY Times article on ARMs by giving her post the title “1,460,000 ARM defaults expected.”

NY Times reported that “According to Christopher Cagan, an analyst with First American Real Estate Solutions, a housing consultancy in Santa Ana, Calif., about 19 percent of the 7.7 million ARM’s taken out in 2004 and 2005 are at risk of defaulting.”

Posters then ganged-up on her because they felt that of the 1.46M ARMs that were “at risk” certainly not all will default. Posters had issues with powayseller’s use of the word “expected.”

Well, if the CRL turns out to be right, then “2.2
million borrowers will lose their homes.” Quite a number!

I’m willing to let time be the judge but that 2.2 million number might turn out to be low.

[CAwireman]

This has become news now. So, I guess the RE industry will begin a new wave of damage control.

Still hoping to see a report that details the number of subprime loans resetting in the next 2 years, by zipcode.

I’m sure its available somewhere, I just need to scour via Google for it….

[sdcellar]

And if powayseller had referred to this report and stated that it predicts 2.2 million borrowers will lose their homes, she would have been providing an accurate assessment.

From where I sit, people don’t “gang up” on powayseller. Rather, several independent participants on the site have near simultaneous “what the hell?” reactions to some of the things she says and feel compelled to comment.

[sdcellar]

Oh, and I know for myself, I didn’t feel her post on this topic (in the past) was irresponsible, just inaccurate.

[no_such_reality]

1 in 5 of a quarter of the market.

The thing that I’m looking at is subprime is only a qaurter of the market. In SD, 60%- 80% of the borrowers in the last two years used some form of ARMs, whether, normal, exploding or exotic (option).

Will the 35-55% of the market that isn’t subprime but potentially used subprimed styled ARM loans have the same or close to the same behavior as the subprime? An ARM isn’t an ARM, what percentage of the 80% of ARMs were exotics/options? I’d guess the majority if not almost universal.

[bgates]

An ARM isn’t an ARM

-is it a duck?

[sdcellar]

Maybe he meant “an ARM isn’t an ARM isn’t an ARM” meaning not all ARMs are created equal? (so yes, a duck, or at least a 7-year ARM that might not be so deadly?)

Although to read it fully, it almost sounds like he thinks the numbers will be higher because of non-subprime borrowers that have taken on riskier ARMS as well. Good credit does not necessily equate to intelligent decision making (although you’d hope/assume there was at least some correlation).

[no_such_reality]

Yeah, I’m wondering what percentage of the 50%+ of all buyers “prime” borrowers got the higher risk payment option, interest only, etc ARMs or a long teaser ARM and run the heighten risk of default.

If the majority got the risky ARMs and default at 1/10th the rate of the subprime borrowers, we’re looking at 1 in 15 of all buyers in the last two years ending in foreclosure. If the rate is half the default rate of subprime, that rises to 1 in 10.

During the bottom of the last cycle, the foreclosure rate peaked at about 1% (1 in 100).

With roughly 100,000 homes sold in the last two years, that puts roughly 5% of current monthly volume up for foreclosure every month for the next four years.

FDIC examins rise in foreclosure trend

[PerryChase]

Very good point. An ARM is an ARM regardless of whether it was issued in the Prime or Subprime market. Plenty of people with good credit gambled on appreciation. I wonder how many of those guys will still have good credit a few years from now.

[Author]

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