Report: Delinquent Prime Mortgages Double In 1 Year
More creditworthy borrowers are falling behind on their mortgages. It's a sign of growing trouble in the housing market. A report from two federal agencies finds the number of delinquent prime mortgages has more than doubled from a year ago. Prime mortgages are loans given to borrowers considered the least risky.
LINDA WERTHEIMER, host:
NPR's business news starts with mixed signals from the housing market.
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WERTHEIMER: A report today from the National Association of Realtors shows that sales of existing homes rose more than 7 percent in November compared to the previous month. But it's not necessarily a sign of economic recovery. The surge in home buying comes thanks to lower prices and government support as in tax credits. And a new government report shows that the number of prime mortgages that are defaulting has more than doubled, and prime mortgages were supposed to be the least risky kind. NPR's Tamara Keith has more.
TAMARA KEITH: More than a million loans were in the foreclosure process as of the end of September.
Mr. GUY CECALA (Publisher, Inside Mortgage Finance): Prime mortgages are really the new wave of problem loans we see and they're strictly economically driven.
KEITH: Guy Cecala is the publisher of Inside Mortgage Finance. According to the report from the Office of Thrift Supervision and the Comptroller of the Currency, nearly half of the foreclosures in process are on prime loans.
Mr. CECALA: With unemployment at 10 percent now, it doesn't matter really what kind of mortgage type you have. Whether it's subprime or prime, you're impacted negatively by losing your job and not being able to make your mortgage payments.
Mr. JAY BRINKMANN (Chief Economist, Mortgage Bankers Association): It is a different problem. It is much harder to deal with.
KEITH: Jay Brinkmann is the chief economist at the Mortgage Bankers Association in Washington, D.C. He says the programs aimed at stemming foreclosure were really designed for the old subprime problems.
Mr. BRINKMANN: All of the programs in place are income-base programs. They're based upon trying to right size the payment based upon what the person's income is that's sustainable.
KEITH: But when homeowners are unemployed there's little lenders can do to make the payments affordable. Tamara Keith, NPR News, Washington. Transcript provided by NPR, Copyright National Public Radio.