Monday, March 3, 2008

Countrywide reports 2007 option ARM 90 day delinquencies rise 900% verus 2006

What a way to end the year for the countries largest mortgage lender! Countrywide reported some horrific news in the WSJ today about the rise in borrowers that are 90 days past due on their loan payments. in 2006 only .6% of of borrowers were 90 days behind on payments. By the end of 2007 that number has risen to 5.4% which is about a 900% increase in people past due 90 days!

As I have explained before there are still about another year of resets so expect these numbers only get worse. I apologize if you cannot read the graph above but Countrywide also looked at how many borrowers are at least 30 days past due and broke it down by prime loans, HELOCS which I discussed yesterday, and subprime.

The numbers here are also staggering. The number of borrowers with subprime mortgages that are 30 days or more past due went from 19% in 2006 all the way up to 27% in 2007. Yes folks that means almost 1/3 of subprime borrowers are past due. There was also a large increase in HELOCS going from 2.9% being 30 days or more past due in 2006 up to 5.9% in '07 which is a more then 200% increase.

Now lets take a look at the stats on the prime borrower. Of all the bad news discussed above this number scared me the most. The prime borrower is supposed to be the best buyer with the highest credit rating and will get the lowest rates. These are the cream of the crop buyers! The number of PRIME borrowers that are at least 30 days or more past due went from 2.8% in 2006 up to 4.2% in 2007 which comes out to a 50% increase.

This number is most frightening to me because subprime has already been pretty much expected to implode. Wall St. is not expecting the PRIME borrowers to cave. If this happens then it will be a massive shoe drop that is not expected by the street and will lead to more write downs.

If the real estate market starts to lose the prime borrower then the whole real estate market could implode. When your best borrowers can't afford their loans then who can??? Bank of America is supposed to be acquiring Countrywide. I wonder after seeing numbers like these if they will end up trying to back out of the deal. With Countrywide owning $28 billion dollars of ARM loans like these they would be crazy not to run away from this deal as fast as they can!

More pain to come. Stay tuned and any comments regarding the real estate market are always welcome here so feel free to share your thoughts!

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