An article from Bloomberg.com by David Mildenberg reported that the nation’s biggest mortgage lender, Countrywide Financial Corp., announced that overdue mortgage loans were at their highest level in six years during January 2008. The amount of unpaid principal on loans more than 60 days late substantially increased to 7.47% from 4.32% in January 2007.
Unfortunately, the number of delinquencies is likely to increase significantly as the year progresses. Analysts at Citigroup have reported that payments on $460 billion of adjustable-rate mortgages nationwide will be re-set this year, with an additional $420 billion expected to re-set for 2011. The increased mortgage payments required by these re-sets is likely to result in additional defaults by borrowers.
The news is no better on the home price front. Some experts are expecting that in some bubble markets ? such as California and Florida ? 2008 will bring another 20% to 25% decline in home prices, which may create another cycle of delinquencies.
These developments do not bode well for investors in subprime-related securities. Further deterioration of this market appears likely.