Investors Default On Outsize Share Of Home Loans

Wall Street Journal ^ | August 31, 2007 | MICHAEL CORKERY and JAMES R. HAGERTY

[CutePuppy]

Investors played a big role in pumping up home prices during the housing boom. Now, they account for an outsize proportion of loan defaults, mortgage bankers and builders say.

A survey by the Mortgage Bankers Association found that mortgages on properties that aren't occupied by the owner -- mostly investment homes -- account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast.

Defaults were high on both prime and subprime loans, those made to borrowers with shaky credit histories.

The four states were among the favorites of speculators during the housing boom. When the market was hot, many speculators bought homes hoping to flip them for a quick profit. But now that home prices have turned lower, that strategy is backfiring.

As a result, some investors have "simply walked away from their mortgages," said Doug Duncan, chief economist of the MBA, echoing recent comments from executives of Countrywide Financial Corp., the nation's largest mortgage lender.

.....

In Nevada, Arizona and Florida, loans for properties that weren't owner-occupied accounted for nearly a third of all home mortgages issued in 2005. The figure was 14% for California and 17% for the nation as a whole. The nationwide share for these primarily investor loans was in a range of about 5% to 7% in the 1990s, then jumped to 11% in 2002, 12% in 2003 and 15% in 2004.

In Nevada, homes that weren't occupied by the owner accounted for 32% of the prime-mortgage defaults recorded as of June 30, the MBA said. Such homes accounted for about a quarter of prime-loan defaults in Florida and Arizona and a fifth in California. For the nation as a whole, the figure was 16%.

.....

[VxH]

[who long for liberty and a return to the rule of law.]

Absolutely!

People seem to have forgotten that a Republic, by definition, can not exist without the rule of law.

And the law must apply equally to all - rich and poor alike.

[Calpernia]

I also found real estate and development listings here and here

[mewzilla]

Countrywide gave plenty. But not to Chuckie "Free credit Reports" Schumer apparently...

COUNTRYWIDE FINANCIAL CORPORATION PAC

I'm not sure what's worse. Doing favors for a contributor, or screwing someone/thing that didn't pony up.

Congress is a cesspool.

[metesky]

Investors Speculators Default On Outsize Share Of Home Loans

[JasonC]

Of course. With prices rising 15% per year and IRs 3-5%, and terms so easy you could buy for nothing to 3% down, speculators played "heads I win, tails you lose" with the banks, over the continuation of the bubble. If prices rose 30% they'd make 5 or 10 times their risked capital, or more. If they fall 30% instead, the bank gets stuck with the loss. The reason prices could rise to stratospheric levels is everyone involved believed somebody else was taking the downside risk.

And who is actually getting stuck with the downside? A few fund investors first, and then everyone via general inflation or financial crisis.

[Old 300]

People seem to have forgotten that a Republic, by definition, can not exist without the rule of law.

What we've had lately is anarchy. It sorrows me to no end.

[The Irishman]

Countrywide gave plenty.

I note they gave nothing to Ron Paul. He can't be bought. That's why a lot of us like him.

Regards.