The Spring bounce and Happy St Paddy's day!

B of A loan rest chart. This month looks like a doozy

The first day of spring is just a couple of days away. The NAR and the CAR and the rest of the *AR's will be expecting the arrival of the "spring bounce". Unfortunately the only bounce is likely to be in the number of foreclosures. I've posted a few charts showing the reset schedules. Normally you could look at the peak months and estimate the peak foreclosures to be 6 months to a year after that. Today however a growing number of these loans are going into default long before the resets. If you look at the foreclosure listings on the market you will see that many of these homes sold in Late 2006. Those loans have already gone bad long before the scheduled resets. I'm not sure if there is any way to accurately estimate (that's an oxymoron for sure) when the foreclosures will peak, level off or even decline. If I were gonna bet a green beer on it, I'd bet it won't be for a while. My guess is that it won't start tapering off until mid or late 09.

Now, if you don't want to rely on my estimates (and I don't recommend you do), then you might want to listen to what Princeton economist Paul Krugman has to say. "What started in subprime is likely to continue cascading into the markets and keep the economy down until 2010, economist Paul Krugman forecasts. In places like Miami or Los Angeles, you could be looking at 40% or 50% declines (in prices)."

If you are bored take a look at the Credit Suisse report from March of last year. I warn you it's a long and boring read but it does have a load of information on the mortgages originated over the last few years.

Here's a few gems from the report,

More than 60% of homes purchased in 2006 had piggyback loans attached to them in hotbeds such as Los Angeles, the Inland Empire, Las Vegas, and Sacramento. More than half of all home purchases last year had CLTVs of 95% or higher in markets such as the Inland Empire, Las Vegas, Fresno, Detroit and Fort Myers (just to name a few!).

While the share of low/no documentation loans appears to be the highest in former investor hotbeds such as California, Las Vegas and Florida, there is not much of a drop-off in other parts of the country. Based on a survey of our private homebuilders, the percentage of buyers providing limited-to-no documentation was greatest in Arizona (71% of total), California (69%), Nevada (52%) and Florida (47%), while the average for all markets in 2006 was 46%.

Low/no documentation loans increased from just 18% of total purchase originations in 2001 to 49% in 2006 according to Loan Performance. Based on a survey of our private homebuilders, the percentage of buyers providing limited-to-no documentation was similar on the new construction side of the business to the overall market, at 46% in 2006. While many believe that buyers choose to provide limited or no documentation for convenience rather than necessity, a study by the Mortgage Asset Research Institute sampling 100 stated income (low/no documentation) loans found that 60% of borrowers had “exaggerated” their income by more than 50%.

An estimated 23% of total purchase originations in 2006 were interest only or negative amortization mortgages. Similarly, according to our private builder survey, interest only and option ARMs represented 24% of new home sales in 2006.