We just saw the release of the foreclosure numbers from the MBA. No surprise that foreclosures hit a new record, but there are little "gems" hidden inside the report.
"Adjustable-rate loans are performing "much, much worse than their fixed-rate counterparts," he said. Subprime ARMs accounted for 43.0% of all new foreclosures during the third quarter, even though they make up just 6.8% or all loans outstanding. Prime ARMs made up 18.7% of the foreclosures started, and make up 14.5% of all outstanding loans."
That is what was reported in MarketWatch and it reveals a different reality than what has been portrayed in the media and government. The painted picture is that of a homeowner facing foreclosure being "subprime" and due to their mortgage rate adjusting higher, beyond their affordability level.
Well, since most Subprime loans are ARMs and those represent 43% of the toal, that leaves up to 57% as being Prime loans, you know those who had credit that wasn’t worth screwing up.
Additionally, look at the total ARM calculation and that represents a total of 61.7% of foreclosures, including the Prime ARMs. That means that nearly 40%, 38.3% to be exact, are actually fixed rate mortgages!!!
Those numbers reveal a completely different reality than what is being portrayed and simply enhances the fact the government should just let the foreclosures run their course and we will all be better off.
