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The Domino Effect of Delinquencies

Yesterday, I posted a blog on foreclosures. In that post I said:

We still have a very serious foreclosure problem in the vast majority of neighborhoods in this country. It will become even a bigger challenge as 2010 moves forward.

Some of our readers contacted me and asked why I felt so strongly on this issue. Banks have been very quiet about how many REOs they are actually holding. Well, my belief is that the banks are holding a substantial number of them.

But let’s assume that number is not as large as many of us believe. There is still definite evidence that there will be a surge in distressed properties made up of homes that have not even been foreclosed on yet.

I am talking about the number of homes that are currently 90+ days behind on their mortgage payments. I have posted on the fact that, once a borrower has fallen 90 days behind on their mortgage, there is less than a 1% chance they will ever catch up on their payments. The home will become a distressed property (foreclosure or short sale).

How many homes will be impacted? The historical percentage of homes falling 90 days behind has always hovered under one percent. Today that has changed dramatically: 90+ day delinquent Fannie Mae loans are at approximately five times that amount; Freddie Mac loans are hovering at four times that amount and one in eleven FHA loans is now 90 days delinquent.

99% of these loans will become a distressed property that will sell at a discounted price which will impact the values of the homes around it.

Here is a map from the Fed showing 90 day delinquency rates by county:

Click for the delinquency rate in your county.

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1 reply
  1. Thomas McGiveron
    Thomas McGiveron says:

    From the bpo’s I’ve been doing – January was HUGE. February, as of today, a substantial decrease. i know bpo’s are ordered for all different reasons – but most of them have a lis pendens filed – so they’re over 90 days behind – so i’m assuming that the bpo’s are not for QA.


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