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GAO Nonprime foreclosure pipeline still congested
WASHINGTON (7/29/09)— About 1.6 million of the 14.4 million nonprime loans written from 2000 to 2007 completed the foreclosure process by March 31 of this year, according to a Government Accountability Office (GAO) study released Tuesday. The study, titled “Home Mortgages: Recent Performance of Nonprime Loans
Click to view larger image Source: GAO
Highlights the Potential for Additional Foreclosures,” also disclosed that of the 5.2 million of those 14.4 million nonprime loans that are still “active,” meaning they have not been prepaid or foreclosed, nearly 25% are seriously delinquent. The GAO defined “seriously delinquent” as either 90 or more days behind in payments or already in the foreclosure process. “As a result, hundreds of thousands of additional nonprime borrowers are at risk of losing their homes in the near future,” the report noted. The study reported that, within the subprime market segment, close to 28% of active loans were seriously delinquent, and within the active Alt-A segment, the serious delinquency rate was about 17%. GAO used the following general definitions: Subprime loans feature higher interest rates and fees and are generally made to borrowers who have tarnished credit histories; Alt-A loans are generally for borrowers whose credit histories are close to prime, but the loans have one or more high-risk features such as limited documentation of income or assets. In both those categories, those with adjustable rates were in the worst shape, the GAO reported, and acknowledged that California, Florida, Illinois, Massachusetts, Nevada, and New Jersey had the highest problem rates as of March 31. Use the resource link below to access the full GAO report.
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