Foreclosures Hit New Record…Well, Duh

by Florida's #1 Mortgage Planner on December 6, 2007

"The rate of loans entering the foreclosure process during the Foreclosure Reasons are a myth third quarter, as well as the percent of loans in the foreclosure process during that time, were at the highest levels in the history of the Mortgage Bankers Association’s quarterly delinquency survey, the group reported on Thursday."

That is how the article in MarketWatch started.  This comes as no surprise to most readers as I have mentioned that foreclosures were going to get worse.  I have also mentioned that it wouldn’t be just a "subprime" thing.

Guess what.  It isn’t.  The more interesting numbers hidden in the new release is that of the percentage of prime loans, you know those with credit not worth screwing up. 

"Adjustable-rate loans are performing "much, much worse than their fixed-rate counterparts," he said. Subprime ARMs accounted for 43.0% of all new foreclosures during the third quarter, even though they make up just 6.8% or all loans outstanding. Prime ARMs made up 18.7% of the foreclosures started, and make up 14.5% of all outstanding loans."

First off, if Subprime ARMs accounted for just 43% of all new foreclosures, what about the other 57%?  Since virtually all subprime loans are ARMs, that would leave the vast majority, if not all, as Prime loans!

Let’s also look at the numbers and find another hidden gem.  Total ARMs, including Prime, represent a total of 61.7%.  That means that over 1/3 of all foreclosures, 38.3% in fact, are fixed rate mortgages!!!!

That is a far cry for the facts the media and the government have been portraying.  They are painting the picture of a homeowner being foreclosed on because they have bad credit and are in an adjustable rate mortgage that will reset beyond what they can afford.

As is typical, reality is different as we can clearly see, around half actually have (or had) good credit and nearly 40% are in fixed rate loans!!!

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