by Calculated Risk on 10/16/2007 11:10:00 AM

From VIKAS BAJAJ at the NY Times: As Defaults Rise, Washington Worries

During the summer’s credit crisis, investors concluded that the default rates on subprime mortgages made last year would probably prove to be the highest in the industry’s history.

But there now appears to be another contender for that dubious honor: loans made in the first half of this year.

Click on graph for larger image.

Borrowers who took out loans in the first six months of 2007 are falling behind on payments faster than homeowners who took out loans last year ...

As of August, default rates on adjustable-rate subprime mortgages written in 2007 had reached 8.05 percent, up from 5.77 percent in July, according to Mr. Youngblood’s analysis of pools of home loans put together by Wall Street banks and sold to investors. By comparison, only 5.36 percent of such loans made last year had defaulted by August 2006. Default rates on fixed-rate subprime mortgages were lower, but were rising at a similar pace.
...
Job losses in the housing industry have put pressure on the economies of formerly fast-growing states like Arizona and Florida. And declining home prices have made it harder for borrowers to refinance loans, especially in cases where the buyers could afford the homes only with the help of the low introductory rates on adjustable mortgages.

Those borrowers are expected to encounter further strain in the months and years ahead as their loans are reset to higher variable rates.

It just keeps getting worse.