by Calculated Risk on 7/04/2009 10:52:00 PM
Saturday, July 04, 2009
Report: Subprime and Alt-A Loss Severity Hits 64.7% in June
From Gretchen Morgenson at the NY Times: So Many Foreclosures, So Little Logic
Alan M. White, an assistant professor at the Valparaiso University law school in Indiana analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo.Well, it is an article by poor Gretchen, so we need to highlight a funny...
...
In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.
Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. ...
Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.
Loan modifications occur when a lender agrees to change terms of a troubled borrower’s mortgage; the most common approach is to reduce the loan’s interest rate. ... Lenders and their representatives, however, don’t like to modify loans through interest rate cuts ...I guess they don't like doing the most common approach!
Note: the database analyzed by Professor White is for subprime and Alt-A only, whereas the OCC data includes prime loans - so it is hard to compare. Here is the OCC report for Q1: OCC and OTS: Prime Delinquencies Surge in Q1
And a couple of earlier posts on the OCC report: