No surprise here: Even amongst the most credit worthy borrowers — aka “Prime” — defaults are rising rapidly. Job losses, debt problems, loss of income are the primary causes.

Prime borrowers at least 60 days behind on mortgages — “Delinquent” is the official term for this period — rose from 497,131 in December to 743,686 in January, according to the Federal Housing Finance Agency. This is almost double the total for October.

The 3 step process is delinquency (60 days late), default (determined by the terms of the mortgage itself — but usually 90 or 120 days behind), leading to foreclosure.

Bloomberg:

“Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators . . .

Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.”

Note once again these are not Sub-prime or alt-A — they are Prime, the highest quality borrowers possible.

>

fannie-freddie-defaults

Chart via Field Check Group

>

Source:
Fannie, Freddie Defaults Rise as Borrowers Cite Lower Income
Dawn Kopecki
Bloomberg, April 21 2009

http://www.bloomberg.com/apps/news?pid=20601087&sid=aw4.u4ryoAq0&

Category: Credit, Legal, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “Delinquencies Rising at Fannie & Freddie”

  1. globaleyes says:

    A rise in delinquencies from prime borrowers is worrisome and would seemingly indicate a worsening depression. Result: pain, stress and suffering.

  2. Concerned American says:

    It is hard to make your mortgage payments without a job. Thank you W, the one that said our jobs moving overseas was a good thing for us, because of the global economy. Now our economy sucks just like the rest of the world. The history books will be puzzled 100 years from now of how one bad Administration brought down the most superior power in the world.

  3. hotelwiz says:

    Proportionate reductions in principal tied to the reduction in market value is the only viable way out of this mess. Haircuts for everyone.

  4. call me ahab says:

    @ concerned american-

    I know being a partisan can color someone’s view of the world- but the sad fact is American companies have been moving plants overseas and outsourcing long before George Bush came around- it’s called finding the cheapest labor- that way when you go to Walmart the price is nice and low- not saying its right- but its the way it is.

  5. vdhinaka says:

    Concerned American,
    “The history books will be puzzled 100 years from now of how one bad Administration brought down the most superior power in the world.”

    There is no puzzle here. A country gets the Administration its people deserve.

  6. wally says:

    Didn’t Ivy Zellman lay this all out years go? I think we are right on script here.

  7. snapshot says:

    http://www.wcbs880.com/Freddie-Mac-Chief-Commits-Suicide/4249204

    “Freddie Mac Chief David Kellerman Commits Suicide”

  8. Concerned American says:

    @ call me ahab…

    You don’t expect your President to praise it. I am not partisan. I hate Democrats and W’s failures have put those geniuses in power now. I was a 35 year Republican and voted for W twice. I would still vote for him over Kerry.

    I see no way I can vote for either Democrats or Republicans in the future. I find the Tea Party BS quite hypocritical.

    My President should do more like Obama is doing a promoting buying American, sourcing American, and putting Americans back to work. Who know Obama may get me to vote Democrat one day should they try to come to the middle on many of their far left reaching ideas?

  9. Marcus Aurelius says:

    Concerned American Says:

    “I am not partisan. I hate Democrats and W’s failures have put those geniuses in power now.”
    ________

    Okaaaaay. . . . . .

  10. JustinTheSkeptic says:

    Oh please! It is a global economy…get some big shoulders and bear it! We have wittnessed these type of corrections throughout history, regardless of where the work it, was, or will be…

  11. dead hobo says:

    https://www.wellsfargo.com/pdf/press/1q09pr.pdf

    Excerpts:

    Record Wells Fargo net income of $3.05 billion

    The net unrealized loss on securities available for sale declined to $4.7 billion at March 31, 2009, from
    $9.9 billion at December 31, 2008. Approximately $850 million of the improvement was due to d declining interest rates and narrower credit spreads. The remainder was due to the early adoption of FAS FSP 157-4, which clarified the use of trading prices in determining fair value for distressed securities in illiquid markets, thus moderating the need to use excessively distressed prices in valuing these securities in illiquid markets as we had done in prior periods

    Comment
    ———————–
    9.9 less 4.7 less .85 = $4.35 billion mark to market gain. Is this good or bad? I’m not smart enough to tell you. Without mark to market revaluations, the net loss would have exceeded $1 billion.

  12. Bruce N Tennessee says:

    Conerned American:

    I don’t share your thoughts that one president got us into this mess. I was no fan of Bush’s either, but Congress pays the bills, and we’ve had deficit spending since Nixon…also I do think that Greenspan, in twenty years, will be seen as an “enabler” of the bubble economies of the last 15 or so years…and that the only good Fed chairman will be Volcker in that time period we’re living in. Unlike Leftback, I am also not a fan of Obama…I am much more fiscally conservative than Reagan, Clinton, Bush, Obama. Economically, nearly all of our presidents seem to be nimrods…

    People seem to think that running a deficit every year is no big deal, and I’ve seen the rationalization of this in many forms. Fact is, deficit spending eventually has to be paid for. Period. This is simple chickens coming in to roost, and the chickens are doing what chickens do…we are just underneath the roost at this time, and can’t dodge the end product…

  13. Bruce N Tennessee says:

    http://news.bbc.co.uk/2/hi/uk_news/politics/8011321.stm

    Darling unveils 50% top tax rate

    “Alistair Darling has announced a new top tax rate of 50% for those earning more than £150,000 from next April. ”

    “The new top rate of tax is a change of plan from the pre-Budget report last year in which he had proposed a new tax rate of 45%. ”

    ….Yep, Leftback…we’ve seen how communities and states are increasing taxes on everything in sight…it appears that our elected officials, instead of cutting the size of government here, are determined to keep the public sector going, and I am sure Obama’s tax plans will mirror those of the Mother Country…

    I doubt even Franklin thinks this kind of tax increase will create jobs or encourage venture capital spending…

    The Beatles had a very good song about the Tax Man many years ago…now we have huge deficits, a probable depression, and INCREASING taxes…

    Priceless……

  14. OkieLawyer says:

    Bruce N Tennessee Says:
    April 22nd, 2009 at 8:44 am

    I don’t share your thoughts that one president got us into this mess. I was no fan of Bush’s either, but Congress pays the bills, and we’ve had deficit spending since Nixon…

    Except during the last two years of the Clinton Administration. However, I get your point.

    Deficit spending represents deferred taxation. The problem is that Keynesian economic model says that the time to raise tax rates is when times are good and the economy is overheating. But that is the very point when politicians (esp. Republicans and “Tea Party” types) say “it’s your money” and argue for tax reductions. The purpose of the Keynesian model is to smooth out the “bi-polar” boom-bust economic cycle. The problem, as I see it, with the Keynesian model is that it goes against human nature. In theory, it actually does work. Deficit spending during recessions/depressions do “soften the blow” of economic downturns. But it must also come with some sacrifices of economic growth during periods of growth. This appears to be the weakness — in practical terms — of the Keynesian model.

  15. aitrader says:

    Looks like my comments wandered away with the DB glitches :)

    I posted a link to the Turner Radio blog, which is a bit “libertarian”, and claims to have gotten a hold of the stress test report. Their summary of the report is that 16 out of the 19 largest banks are technically insolvent and if any two of them fail the FDIC will need to source more funds. Hard to say whether Turner has the real deal or not until we see the actual source material.

    http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html

    ‘Course the treasury denies they have the real report – http://news.google.co.uk/news/url?sa=t&ct2=uk%2F0_0_s_0_0_t&usg=AFQjCNF4osk-9IMlC-7M2wca3v_u4lmQEQ&cid=1338968866&ei=ZRXvSdjNIovGsga5m4Rs&rt=SEARCH&vm=STANDARD&url=http%3A%2F%2Fwww.thestar.com%2FBusiness%2Farticle%2F621538 .

    I’ve watched Wells Fargo claim that they maintained much higher lending standards than their competitors and are unaffected by the sub-prime and alt-a defaults. Now that prime loans are also affected I wonder if they will change their tune? If we include known losses at their Merrill Lynch subsidiary, just where do these profits come from?

    I’d also point to mounting defaults in credit cards, car loans, and commercial real estate as just mroe mounting worry. Just how much money does Obama and team think they can dig up? I mean we aren’t talking tax receipts here. We were already running a large deficits long before this pucky hit the fan.

    Bear market rally before the real crash anyone? That’s my bet. Shades of 1930 (shudder).

  16. Bruce N Tennessee says:

    @ Okie Lawyer:

    “In theory, it actually does work. Deficit spending during recessions/depressions do “soften the blow” of economic downturns. But it must also come with some sacrifices of economic growth during periods of growth. ”

    …Then I gather you think tax increases during a downturn “strengthens the blow”?

  17. call me ahab says:

    Bruce-

    good point

  18. OkieLawyer says:

    @Bruce:

    I have said before that tax increases during downturns come at the worst time. But that is the way that politicians think: raise taxes when revenues fall and cut them when they swell — which exacerbates the swings in either direction. The problem is that deficits were used even during times of prosperity — which is when you should be paying off the debts incurred during recessions — and it has made deficit spending when it is needed (like now) much more problematic.

  19. deanscamaro says:

    You really have to feel sorry for some of them, especially the ones who had their multi-million dollar bonuses cut. That must really hurt. NOT!!!

  20. batmando says:

    Freddie Mac acting CFO found dead in apparent suicide
    http://news.yahoo.com/s/nm/20090422/bs_nm/us_freddiemac_kellermann_8
    WASHINGTON (Reuters) – David Kellermann, acting chief financial officer of mortgage giant Freddie Mac, was found dead on Wednesday in his suburban Virginia home, a Fairfax County police spokeswoman said.
    Police were called at 4:48 a.m. EDT to Reston, Virginia, spokeswoman Lucy Caldwell told Reuters.
    Local media reported that Kellermann’s wife called in an apparent suicide, but Caldwell did not elaborate on the cause of death.
    The incident is “under investigation,” she said.
    According to Freddie Mac’s website, Kellermann, 41, was with Freddie Mac for more than 16 years and named acting CFO in September.

  21. “The history books will be puzzled 100 years from now of how one bad Administration brought down the most superior power in the world.”

    The history books will easily explain the decline and fall of the American empire as analogous to that of so many before it…the Roman Empire, the Ottoman Empire, the British empire, etc. Every empire carries within its creation the seeds of its own destruction, but, since this isn’t a history blog, I’ll refrain from explaining further.

    Suffice to say that leaders great and small have little impact on the natural imperatives, the vast biological forces at work, that either compel empire or destroy it.

  22. leftback says:

    @ Bruce: “The Beatles had a very good song about the Tax Man many years ago…now we have huge deficits, a probable depression, and INCREASING taxes…”

    Right on Bruce, the swinging 60s are giving way to the strife of the 70s… or is it the 30s? It is starting to look much more deflationary out there all of a sudden. It is interesting to note that the new target audience for the tax increases in London and NY ($250K/yr earners) can still barely afford the median home in those cities….

    I think if we are going to increase taxes we need to look a little higher up the tree – and shake it HARD.

  23. aitrader says:

    Apologies for quoting Turner’s “leak” of the stress test report. Turns out he’s a lunatic bigot anti-smite out for publicity. I should do a little research before dropping in links from folks I don’t follow.

    http://www.portfolio.com/views/blogs/the-weiss-file/2009/04/21/bigot-revels-in-his-three-seconds-of-fame

    A few of his choice comments are collected here:

    http://www.adl.org/main_extremism/turner_own_words.htm

    Whoops! The Internet is still a bit of the wild west. Sorry about the (mis)quote and link about the bogus report.

  24. mikaeel says:

    Every empire carries within its creation the seeds of its own destruction. Sounds like prophecy.

    The American revolution was inflamed by taxes and trade issues. The British government owed the Bank of England and was going to make sure the American’s paid the debt.

    2008 Now we’re being taxed and only the Federal Reserve seems to profit.

  25. stevphel says:

    Just wanted to alert you guys on the east coast to what is happening over here in the west – the real estate market is in complete collapse!

    I am bidding on condos in one of the nicest areas of Vegas for under $40K. Two years ago they sold for $160K+.

    Prime or not, people are seeing a 50%+ reduction in home values. And many are just walking away and taking the hit. It’s not about losing jobs or income – it’s about refusing to get screwed. Like hotelwiz said, proportional haircuts are the remedy.

  26. drollere says:

    the sharp rise comes 60-90 days after the end of SB1137. average the spikes back into the earlier trough, and you could argue the loans have been closing at a lower, steady pace since last august.

    and this is, basically, good news. the least credit worthy fold first, because they are not credit worthy, and the most credit worthy fold last, because they get taken down by the late externals — lost jobs, reduced consumer demand, souring local economy. i am still looking for housing to bottom out this summer. meantime, this is just more housing stock for new buyers. cash gets put back to work for everyone except the home builders.

  27. bman says:

    stevphel Says: I am bidding on condos in one of the nicest areas of Vegas for under $40K. Two years ago they sold for $160K+.

    Nice 25cents on the dollar. I just wonder when people walk away from the home doesn’t that just mean that they don’t like the home underneath all the other concerns? 10 years ago, one could buy a home in a bulldozed cornfield live in it for five years and sell it at a profit. With that market environment your typical homeowner, could literally live in Hell for five years and still feel they’re doing ok, because there was always another sucker around to take it away once their time in Hell was up. There are flavours of hell, no downtown nearby, no grocery, giant lawns to tend, no lawns to tend, No water home, the living on the San Andreas fault line home, Hurricane alley home, Even the too huge house for your needs but still you live there because when you sell it you think it will appreciate more then a little house.

    When Stevphel talks about the condos going at 75% off, in the good neighborhood, it makes me wonder if Las Vagas is really a good place to live.

    When I was home shopping I looked at quite a few, and I had strict guidelines of what I would consider.
    Yes my home has lost value the last couple years maybe as much as 30-40% but I like it too much to consider walking away. Is that marking to market?

  28. leftback says:

    The prime meltdown is a sign of severe stress in the upper middle class.
    This group owns stocks. Draw your own conclusions.

  29. I am bidding on condos in one of the nicest areas of Vegas for under $40K. Two years ago they sold for $160K+.

    And yet the market found a buyer. Are you going to live in all those places? If not then I suppose you think you can capitalize on the deal somehow. The market seems to be working for you. That’s good!