« Fannie to Settle Charges, Pay Fine | Main | WaMu Slashing 850 Local Jobs »
May 26, 2006
'05 Home Loan Delinquency Rise a Riddle
The usual explanations for a rise in home loan delinquencies do not seem to apply to an increase in the number of past-due mortgages originated in 2005. Bear Stearns Co.'s Bruce Kramer says nonagency mortgage-backed securities of all collateral types have reported weaker performance, meaning that an increase in subprime loans is not the cause. Though many of the mortgages written last year were hybrid adjustable-rate, interest-only or negative-amortization loans, Kramer points out that they have not yet reached the end of their low initial payment periods, generally one to 10 years. Kramer says 85 percent of delinquencies can be attributed to the fact that they were originated in 2005, suggesting that "there is something in the 2005 vintage that cannot be explained directly in the changes of collateral attributes;" while 10 percent are tied to lower home-price appreciation, 8.6 percent to a jump in combined loan-to-value ratios, 4.1 percent to a shift in loan purpose, 3 percent to multiple risk factors and 2 percent to minimal documentation.
Posted by S. Germain at May 26, 2006 07:51 AM