Prime Borrowers Are Defaulting Faster Than Subprime

That’s right and I know it is hard to believe but unfortunately a big driver of this is job losses.  Also, I would imagine many prime borrowers are making the decision whether to continue to pay on a property that they can afford but lost 30-40% in value especially in South Florida. 

You might not like what I am going to say but it is a financial decision.  Unfortunately many prime borrowers did the right thing and have lost so much value due to the bad decisions of others.  I don’t suggest anyone to do this but there are pros and cons of paying your mortgage and walking away.  That is a decision that each individual needs to make on their own. 

Hopefully the article is right that the subprime pain is in the rearview mirror.  I guess it makes sense since a lot of these individuals never could afford the property in general so they were much faster to fall behind and have already foreclosed. 

http://www.cnbc.com/id/32688303 

Is The Housing Market Hitting The Rich?

It certainly seems to be according to the 2 articles below.  The first article talks about Jumbo Loan delinquencies and the second about how their stocks are down and they rely on equities. 

 

http://online.wsj.com/article/SB123335694204035027.html?mod=todays_us_money_and_investing

 

http://finance.yahoo.com/news/HighEnd-Housing-Market-cnbc-14235694.html

Direct Assistance To Borrowers In Default?

This is an incredible article below.  To sum it all up what he is saying is “Under current economic conditions, firms lose about 50 percent of the unpaid loan balance on home loans that are foreclosed. On a $100,000 loan, for example, the firm nets about $50,000 from sale of the property less the foreclosure expenses. It would cost the government $50,000 to make the firm whole.

An alternative is to direct government assistance to the borrowers in default by writing down their loan balances. In some cases, the default is not curable even with a balance write-down of 50 percent. In most cases, however, a balance write-down of less than 50 percent will cure the default by making the loan affordable and by increasing the borrower’s equity. At a guess, the required write-down will average 25 percent, which would cut the government’s cost in half.”

http://finance.yahoo.com/expert/article/mortgage/138897 

Jumbo Mortgage Troubles

You have to love this article on how defaults are increasing on Jumbos.  The 3 banks that did the most jumbos were Chase, Wells Fargo, and Bank of America.  Chase’s CEO James Dimon states “We were wrong.  We obviously wish we hadn’t done it.”

 

A jumbo mortgage is a loan amount greater than the conforming loan limits for Fannie Mae and Freddie Mac of $417,000.

 

http://online.wsj.com/article/SB123310421416822271.html?mod=todays_us_money_and_investing