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Economy in Brief

U.S. Mortgage Foreclosures: Conventional Up, Subprime Soared
by Tom Moeller December 6, 2007

The Mortgage Bankers' Association today reported that foreclosures started on all mortgages rose to a still low 0.78% of mortgages outstanding. Nevertheless, that was by far the highest foreclosure rate on record.

Foreclosure rates on both prime and subprime mortgages rose sharply. Rates for prime FRM rose to 0.22% of loans issued from 0.18% in 2Q and an average of 0.14% last year. 28 million loans were serviced.

Foreclosures on prime ARMs similarly rose to 1.02% from 0.62% and from 0.30% last year. 6 million of these loans were serviced.

Foreclosures on subprime mortgage debt, however, rose much more sharply as employment growth slowed recently and interest rates rose. In total, foreclosures on subprime mortgages rose to 3.12% of outstanding loans. That amounted to 6 million loans. The rise was evenly spread between fixed and variable rate loans.

Foreclosures on subprime fixed rate debt rose to 1.38% of loans outstanding for a total of 3 million loans serviced.

On variable rate subprime debt, however, foreclosures soared to a 4.72% rate, up from 3.84% in 2Q and up from 2.0% last year. Three million loans were serviced.

The Rise and Fall of Subprime Mortgages from the Federal Reserve Bank of Dallas can be found here.

These data series are available in Haver's MBAMTG database.

Mortgages in Foreclosure (%) 3Q '07 2Q '07 3Q '06 2006 2005 2004
All Mortgages 0.78 0.65 0.46 1.84 1.64 1.73
   Conventional Prime 0.37 0.27 0.19 0.77 0.72 0.77
     Fixed Rate 0.22 0.18 0.13 0.14 0.15 0.16
     ARM 1.02 0.62 0.30 0.30 0.19 0.18
   Subprime 3.12 2.72 1.82 7.23 5.66 5.98
     Fixed Rate 1.38 1.35 0.97 1.06 1.08 1.44
     ARM 4.72 3.84 2.19 2.20 1.52 1.52
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