Government mortgage report shows higher loan rates producing delinquencies |
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Wed, 12 Sep 2007 21:21
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WASHINGTON (Thomson Financial) - The more high-rate mortgage lending has been going on in a metropolitan area, the more homeowners there are likely to be in danger of losing their homes, according to a US government report released today.An annual mortgage lending survey for federal banking regulators concluded that 'counties with elevated rates of higher-priced lending also have elevated rates of serious mortgage delinquency.'Even accounting for varying economic factors, the economists say, 'all else being equal, an increase in the incidence of higher-priced lending of 1 percentage point implies an increase in the rate of serious mortgage delinquency of 0.03 percentage points.That may not sound like much, but the report points out, the median rate of serious delinquency was just 1.27 pct when the statistics were compiled at the end of March.'Higher-priced' mortgages are defined by comparison with Treasury debt interest rates--usually 5-7 percentage points higher. In 2006, 29 pct of home loans fit the higher-priced category, up from 16 pct in 2004.The economists warn that 'a significant share of higher-priced loans apparently involve adjustable rates and carry the potential to significantly increase monthly payments. The growing delinquency rates from ARMs, they say, may not show up in their data.The report is issued each by the Federal Financial Institutions Examination Council on behalf of federal regulators and covered almost 9,000 bank and non-bank mortgage lenders.dennis.moore@thomson.comdem/cbd/washCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
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Ahead of the Bell: Mortgage Applications 