Repo Homes Lists Will Soar as Lapsed Mortgages Increase
Repo homes lists will soar and will contain around 1.15 million residential properties in the middle of 2010 because of the inability of homeowners to catch up on their monthly payments, according to Baclays Capital.
This prediction is also supported by a study held by credit rating firm Fitch Ratings Ltd. on the cure rate for delinquent mortgages. Cure rate refers to the percentage of delinquent home loans restored to regular and updated status each month.
Fitch reported that the percentage of delinquent homeowners who have failed to restore their mortgages to current status has increased in July. The cure rate for prime mortgages had sharply dropped from the average of 45 percent cure rate during the seven-period 2000 to 2006 to only 6.6 percent in July.
For Alt-A loans, the cure rate has also sharply dropped from 30.2 percent to 4.3 percent. For subprime home loans, the cure rate fell from 19.4 percent to 5.3 percent.
Fitch managing director Roelof Slump said that the cure rates had record declines.
Barclays Capital said that foreclosures will continue to rise in many areas across the country as homeowners fail to catch up on their loan payments. The firm’s 1.15 million projection for the middle of 2010 is a substantial increase from the 688,000 foreclosures posted in July.
Analysts said that the cure rates declined despite efforts by President Barack Obama, Treasury Secretary Timothy Geithner, HUD Secretary Shaun Donovan and lawmakers to pressure lenders to intensify their loan modification efforts. Their efforts were even stepped up by mandatory mediation and other foreclosure prevention programs launched by state governments.
According to Fitch analysts, the cure rates could have been much lower if there were no federal and state intervention.
In recent months, the major cause for delinquencies and foreclosures was no longer risky unaffordable loans but unemployment.
Nationwide, the unemployment rate in July was little changed at 9.4 percent compared to June, according to the Labor Department. But it represented an increase of 3.6 percentage points from July last year. The jobless rate increased in 26 states, compared to June, and decreased in 17 states and Washington, D.C. Seven states reported no rate change.
Lastly, the Fitch study included around $1.7 trillion of home loans packaged into securities, representing about 16 percent of all outstanding mortgages in the U.S. It did not include loans guaranteed by federal agencies and loans not bundled into securities.
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- Record High Repo Homes Listings in Dallas-Fort Worth
