Fannie Mae Reports Spike in Delinquent Home Loans
Fannie Mae reported a significant increase in the percentage of home mortgages with delinquent mortgage payments. The government-backed home loan investor said in a monthly summary released Monday that 3.42% of the 1-family home loans it owns or guarantees were 90 days or more delinquent in April, up from 3.15% a month before. Fannie’s main rival, Freddie Mac, reported last week that its single-family delinquency rate for May was 2.62%, up from 2.44% in April.
Fannie and Freddie are the main providers of funding for U.S. home mortgages. Although the two companies bought many of the riskier types of home loans in recent years, their main business is in prime mortgages. More prime borrowers have been falling behind as they lose jobs or their incomes fall. Loan modification plans continue to rise as FHA mortgage refinancing has not been an option for most homeowners who have multiple late payments being reported on their credit reports.
Richard DeKaser, an independent economist in Washington, D.C., blamed the continuing rise in mortgage delinquencies on the spike in job losses and on what her termed the “evaporation” of home equity amid falling home prices, leaving many borrowers without a cushion when they lose their jobs.
Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., said recent home loan delinquencies are “mostly driven by job losses.” He expects unemployment to peak in mid-2010 at about 10.3%, up from 9.4% in May.
Jay Brinkmann, chief economist of the Mortgage Bankers Association, said late payments probably won’t start to decline before the second half of next year. FHA home loans now are the biggest source of growth in foreclosure starts. Much of the subprime problem has already washed through the system because very few new subprime mortgages have been made since early 2007. “You’ve essentially burned through the worst of them,” Mr. Brinkmann said. The article was written by JAMES R. HAGERTY
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