Prime foreclosures surge

Prime Foreclosure Starts Surge Past Subprime in July (August 28 - Housingwire)


There can be no remaining doubt that the nation’s mortgage crisis has become a problem for prime credit borrowers: data released by the HOPE NOW coalition on Wednesday finds that prime foreclosure starts have finally moved ahead of subprime foreclosure starts, for the first time since the industry coalition began collecting data in July of last year — and likely for the first time in a much longer timeframe, as well, sources suggested to HousingWire Thursday afternoon.

HOPE NOW’s monthly data shows that during July, foreclosures were initiated on 105,000 prime borrowers and 92,000 subprime borrowers. Prime foreclosure starts in July were well more than double the 51,000 recorded one year earlier, and up almost 10 percent from June; in comparison, subprime foreclosure starts in July were up 22 percent from one ago, and up 10 percent month-over-month as well. “It’s easy for lawmakers to paint a picture of poor borrowers taken advantage of by big, bad lenders,” said one source, a bank executive that asked not to be named. “But that story falls apart when you start to see even those higher up the credit ladder struggle.”


Wow, with three exclamation points. The fact that PRIME foreclosures have now moved past SUBPRIME foreclosures is a big deal. In case you don’t know, the Hope Now program is a government-sponsored affair that was initiated very early on in the housing/credit bust. Its intent was to help borrowers avoid foreclosure by renegotiating the terms of their deal(s).

Like any good government program, its name is a curious acronym that seems cruelly destined to attract the exact opposite outcome. The read-between-the-lines story here rests with Fannie and Freddie. While they are not specifically participating in this charade, it bears noting that both Fannie and Freddie remain steadfast in claiming that their prime mortgage portfolios are exhibiting normal amounts of foreclosure stress.

Oddly, we are now inundated with news that prime mortgages are experiencing unprecedented rates of distress everywhere, except at Fannie and Freddie, apparently.

While this could be true, it seems odd that a pair of GSEs, both of which recently claimed there was no possible way to foresee this particular housing downturn, managed to also accumulate portfolios that are weathering this storm in much better style than everybody else.

My guess? The same approach to reporting that gave us the 3.3% economic growth is being used by the GSEs. In short, caveat emptor.

Hmmmmm, I just looked it up, and “caveat” is not Latin for “taxpayer,” so I retract that last sentence.

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