More On Mortgages, Part I

In the comment section I stated:

The last time I saw stats, the default rate of ALL mortgages was 10 percent. The subprime mortgage default rate was a total of 1.5 - 2 percent of all defaulted mortgage loans.

Since when is a default rate of 2% enough to tank a market?

I should have stated:

The last time I saw stats, the default rate of ALL mortgages was 10 percent. The sub-prime mortgage default rate was 1.5 - 2% of all mortgage loans.

I think that clears up PART of what I wrote.

I got the 10% number from general news articles like this one:

Single-family residential delinquencies soared to nearly 7 percent during the third quarter, reaching 6.99 percent in the Mortgage Bankers Association’s latest delinquency survey data; that’s up 140 basis points from one year ago and 58 points from Q2 on a seasonally-adjusted basis. In other words: we continue to have a problem.

But it gets worse. That total doesn’t include loans somewhere in the process of foreclosure, which reached 2.97 percent at the end of Q3, up 22 basis points from one quarter ago and 128 basis points from one year earlier. A basis point is one one-hundredth of a percent. Taken together, then, 9.96 percent of all existing mortgage loans were delinquent or in the foreclosure process as we headed into October; and that’s despite efforts from lawmakers and others to stem the foreclosure tide.

I've been sloppy in lumping defaulted loans with loans in foreclosure. I think the distinction is clear and needs to be made, so I'll try to make it in the future.

Loan data at end of June, 2008:

Current loans: 92.61%

30-59 days delinquent: 2.85%

Seriously delinquent (60+ days): 2.95%

Foreclosures in progress: 1.60%

More later...