Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Huge Plunge In Mortgage Cure Rates Portends Foreclosure Disaster

IMG Auteur
Published : August 25th, 2009
470 words - Reading time : 1 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Editorials

 

 

 

 

Mortgage cure rates have fallen off a cliff. For those unfamiliar with the term, a "cure rate" pertains to those who go delinquent on loans then catch up and become current. Late payments that don't "cure" have a tendency to get later and later over time, before they eventually default.

Fitch ratings notes
Cure Rates Plunge Among Prime RMBS.

According to Fitch, cure rate on prime mortgages plunged to 6.6% from an average 45% during 2000-2006. Alt-A cure rates plunged to 4.3% from an average 30.2% and subprime cure rates fell to 5.% from an average 19.4%.

A couple of charts can help put this in context. Here is a chart from
Hidden Backlog of Foreclosures.

Pent Up Foreclosures By State




click on chart for sharper image

In regards to the above chart I said.

 

The area in pink represents potential foreclosure demand. Not all of that area will be foreclosed, but some of it sure will. The "Hidden Backlog" mentioned above (and highlighted in red) is within that pink area.

One thing missing from the chart is pent-up demand from those who are not delinquent yet have a huge incentive to walk because of massive negative equity.

For a look at "negative equity", moratoriums, and other foreclosure issues please see
Brace for a Wave of Foreclosures, the Dam is About to Break.

 

With the new data from Fitch let's take a second look using another chart from Calculated Risk's post MBA Forecasts Foreclosures to Peak at End of 2010.

Prime Delinquencies and Foreclosures




click on chart for sharper image

In 2006 less than 3% of prime loans were delinquent and nearly half of them cured. Currently close to 6.5% of prime mortgages are delinquent (another 3% are in foreclosure). Worse yet, the cure rate is miserable. Even reworked loans quickly sink back into delinquency.

A key reason for the falling cure rates pertains to underwater mortgages. In 2006, someone might easily have had positive equity in their home and sold it (curing the loan). Most in trouble now do not have positive equity and cannot sell.

Of the 6.5% delinquent, the current cure rate is a mere 6.6%. On this basis, prime foreclosures could spike to 9%. If that sounds preposterous, note that prime delinquencies were close to 3% in 2007 and by second quarter 2009 the foreclosure rate hit that same 3% rate. Foreclosures follow delinquencies over time and a sinking cure rate makes that prognosis even more likely.

What happens now depends on jobs and home prices, neither of which looks very promising. Even 5-6% prime foreclosures would be a disaster and that looks increasingly likely.

 

Mish

GlobalEconomicAnalysis.blogspot.com

 

 

 Mish's Global Economic Trend Analysis

 

 

 

 

 

 

 

<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
IMG Auteur
Mish 13 abonnés
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. He writes a global economics blog which has commentary 5-7 times a week. He also writes for the Daily Reckoning, Whiskey & Gunpowder, and has over 80 magazine and book cover credits. Visit http://www.sitkapacific.com
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Do You, Mr. Jones…?
25 MayJake0
Then what? Since Trump was elected as an NFL punt type kick to the balls of the establishment, we Deplorables would kill them, mayhem would r...
Bill Murphy: Silver – The Only Commodity 66 Cheaper Than 37 Years A...
25 MayS W.-1
Gold is not money. Wealth Yes. Silver is a form of money. Its just losing its value with respect to the $USD ( currently) When peop...
The Escape from Collectivism - Jeff Thomas
23 MayFalconflight
Your summation on collectivism cannot be heralded enough.
The Escape from Collectivism - Jeff Thomas
23 MayFalconflight
Oy Vey...
Bill Murphy: Silver – The Only Commodity 66 Cheaper Than 37 Years A...
23 MaySNAFU-2
Right. Gold is money, but, if I understand well, we have no use for it in the world, because of popular TV show and because the idea has ...
The Escape from Collectivism - Jeff Thomas
22 Maysam_site
Globalist investigator Leuren Moret discovered that Fidel Castro, far from a grass roots revolutionary, was a Farnese duke from a prominent Black N...
Bill Murphy: Silver – The Only Commodity 66 Cheaper Than 37 Years A...
22 Mayprljr-2
"depict Armageddon or viruses or zombies never show people trading gold for items." Food ,medicine and Guns and ammo will be traded if it comes...
Gold Bullion +2 for Week vs Falling Dollar as Trump's Troubles Spre...
19 MaySam Maher
"Giant gold-backed ETF the SPDR Gold Trust (NYSEArca:GLD) in fact shrank Thursday as stockholders liquidated shares, reducing the amount of bullion...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS