Here’s a couple (here are a couple …) facts & figures about subprime loans, etc., courtesy of the Associated Press:
The No. 1 reason its customers have been defaulting on mortgage loans is because their income was cut. That accounted for almost 60 percent of its loan defaults in the first 10 months of this year; add in sickness and divorce and the total jumps to more than 80 percent.
80% of loans in default are due to changes in homeowners’ financial situations.
Not resetting adjustable rates.
According to the study, done by Countrywide, only 2% of loans in default are due to payment adjustments. (Figures subject to change, next year, of course, as more people face resets …)
The federal government has unveiled a loan modification program that will attempt to help homeowners facing higher loan payments, by asking lenders to freeze the interest rates at the current levels, for at least a couple years.
Some 1.2 million households could be affected by the plan, at least by the government’s estimates. Analysts see the numbers coming in much lower at around 350,000, given the strict eligibility requirements.
Finally, using past figures, a separate study done estimates that, in good times, the “re-default” rates for loans which had their rates reset to lower levels reaches 25% for conventional loans and between 40-60% for “Alt-A” and “subprime” loans. In good times.
Meaning, it looks as though 50% of those who can take advantage of lower rates offered through the government’s plan may end up defaulting, regardless.
Source: What’s Behind Foreclosures? – By Rachel Beck, Associated Press, by way of Google News