First to default were the now (in)famous “sub-primes”. Defaulting now are the “primes” and the “alt-A’s”. Next up: “Commercial Real Estate Mortgages”. On top of those: “Mortgage Backed Securities” and other derivatives of all kinds. So many different names for paper debt. Here are some stats from Bloomberg for the third quarter of 2009:
- 937,840 homes received a default or auction notice or were repossessed by banks, a 23% increase from a year earlier
- 1 of every 136 U.S. households received a filing, the highest quarterly rate on record
- A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005
- The pace of prime and so-called alt-A loan defaults is accelerating
- The delinquency rate (failure to pay) for prime loans rose to 6.41% in the second quarter from 6.06 percent
- The share of prime loans in foreclosure increased to 3% from 2.49%
Prime loans are those made to borrowers with the best credit records while alt-A loans are considered riskier because they were often granted without documenting the borrower’s income. “The best” borrowers are now incersingly defaulting as (official) unemployment in the US goes above 10%. Shadowstats.com puts that number at about 21%.
