Mortgage Delinquencies Spike

[RVR]

FHA Mortgage Delinquencies Reach a Record High

 

Federal Housing Administration mortgages now have the highest delinquency rate in at least four decades.

 

The share of late FHA loans rose to almost 16% in the second quarter, up from about 9.7% in the previous three months and the highest level in records dating back to 1979, the Mortgage Bankers Association said Monday.

 

BLOOMBERG

.

"It's like deja vu all over again"

 

[tiggerlgh]

FHA loans are pretty much subprime loans. No surprise here. The government keeps pushing banks to originate them.

[RVR]

1 hour ago, tiggerlgh said:

FHA loans are pretty much subprime loans. No surprise here. The government keeps pushing banks to originate them.

Famous last words from 2008:

 

'Don't worry, it's just the subprime mortgages'

 

[cv91915]

It's almost like it's a bad idea to take out a mortgage when you have no savings and awful credit.  😑

[shifter]

I can't imagine anyone is surprised. Given the financial status of the individuals taking these loans, from day one they are one step from disaster.

[RVR]

I guess it couldn't possibly be the 33% negative GDP and the more than 28 million STILL receiving some form of unemployment as of today.

 

[tiggerlgh]

I guess it couldn't possibly be the 33% negative GDP and the more than 28 million STILL receiving some form of unemployment as of today.
 

Nope, as if they had savings they wouldn’t be delinquent yet.

[centex]

2 hours ago, RVR said:

I guess it couldn't possibly be the 33% negative GDP and the more than 28 million STILL receiving some form of unemployment as of today.

 

I see you chose to look at the headlines as opposed to the actual change.  The headline writers don't have a grasp on reality either.  You cannot just take one quarter, multiply it by four and have the actual annual total, especially when the numbers show demonstrably that it won't be a drop of that magnitude when viewed full year over year...

 

[hegemony]

1 hour ago, tiggerlgh said:

Nope, as if they had savings they wouldn’t be delinquent yet.

same for all those small "businesses" that needed PPP welfare free loans.

[RVR]

4 hours ago, centex said:

I see you chose to look at the headlines as opposed to the actual change.  The headline writers don't have a grasp on reality either.

Except I'm not the one out of touch with reality.

 

Quote

You cannot just take one quarter, multiply it by four and have the actual annual total...

I'm afraid you're barking up the wrong tree.

 

It is the standard metric of the BEA (U.S. 'Bureau of Economic Analysis') to present quarterly GDP on an annualized basis, not as a result of any arithmetic by ME.

 

[cv91915]

On 8/19/2020 at 1:02 PM, tiggerlgh said:

FHA loans are pretty much subprime loans. No surprise here. The government keeps pushing banks to originate them.

And yet somehow it's mainly credit card companies and payday lenders that are demonized for "trapping people in a cycle of debt."

[cashnocredit]

On 8/20/2020 at 4:10 PM, RVR said:

Except I'm not the one out of touch with reality.

 

I'm afraid you're barking up the wrong tree.

 

It is the standard metric of the BEA (U.S. 'Bureau of Economic Analysis') to present quarterly GDP on an annualized basis, not as a result of any arithmetic by ME.

 

The annualized decrease in GDP, while normally a useful predictive, isn't because of the special nature of the Covid-19 impact. It was particularly bad in that quarter and in no way indicative that the real GDP for 2020 will decline 35%. Even the 9.5% decline is too much since things have and are recovering somewhat from the initial impact. My SWAG is that 2020's GDP will wind up being about 6% to 8% below 2019.

 

Also, GDP predictions were not part of the linked headline nor part of the pieces' text.

 

That said, FHA mortgages are often to people that have no savings and can't easily tolerate a multi-month loss of income. For those affected, most will continue to be late as catchup is hard.  So the delinquency rate of FHA loans will stay quite high for a long time. Recovery will be much slower than the overall economy. 

[RVR]

On 10/17/2020 at 11:43 AM, cashnocredit said:

The annualized decrease in GDP, while normally a useful predictive, isn't because of the special nature of the Covid-19 impact. It was particularly bad in that quarter and in no way indicative that the real GDP for 2020 will decline 35%.

And WHO claimed it would?

 

[cashnocredit]

4 hours ago, RVR said:

And WHO claimed it would?

 

Here's a link:

https://www.usatoday.com/story/money/2020/07/29/u-s-gdp-nations-economy-likely-shrank-35-annual-rate-q-2/5530223002/

 

Note that this was only mentioned in the thread w/o a link. It's misleading in the sense that it's annualized and not really applicable to unusual circumstances like Covid-19. The actual decline estimate was 1/4 of that but projections assume a trend hence the 35%. So, for instance if GDP increased 1/2% in a quarter, the annualized GDP growth estimate would be 2%.

 

 

[CreditCurious20]

On 8/19/2020 at 1:36 PM, cv91915 said:

It's almost like it's a bad idea to take out a mortgage when you have no savings and awful credit.  😑

It depends. It's obviously preferable to do a conventional with a sizable down payment, but FHA can make sense to a borrower even though it is a very expensive loan. Examples include markets where rental costs greatly exceed PITI on a mortgage or when housing price annual growth greatly exceeds inflation allowing an equity nest egg that can possibly bail them out later.

Edited October 20, 2020 by CreditCurious20

[CreditCurious20]

On 10/17/2020 at 5:33 AM, cv91915 said:

And yet somehow it's mainly credit card companies and payday lenders that are demonized for "trapping people in a cycle of debt."

Mortgage lenders don't routinely charge interest rates in excess of 20-30+%. And unlike credit card purchases, housing isn't a luxury expense. While it is true that some individuals foolishly use credit cards to finance luxury items and may not deserve sympathy, many more individuals are forced to use them. I don't advise using CCs to subsidize income, but that reality is that stagnant wages for nearly two decades have forced some to do just this. Think the single mom who lost her husband in Iraq or Afghanistan or someone with an acute disability. Just because you can stick it to people legally with usurious interest doesn't mean you should. And while low down payment loans with high PMI and higher rates are costly, the comparison to CC companies and payday lenders (some who charge triple digit interest rates) is not apt IMHO. 

 

With this said, I agree with the sentiment that no one should be surprised by higher FHA delinquency rates given higher risk demographics. I also think there are more factors at play. The FHA moratorium on payments during Covid may have enticed many to skip a few months worth of payments to build an equity nest egg and then modify the mortgage. While more expensive and a debatable financial decision, to someone that fears losing their job it may seem reasonable to them. In other words, the delinquency rate could also be artificially high.

[RVR]

11 hours ago, cashnocredit said:

Here's a link....

No, WHO made this claim:

 

Quote

in no way indicative that the real GDP for 2020 will decline 35%.

Nobody I've seen.

 

Also, not sure what the complaint is. The BEA could report the quarterly GDP as say $21.54 trillion, but that would be rather meaningless to most people. They could report quarterly GDP as a quarterly gain/loss, but that merely compares it to the previous quarter, again rather meaningless, not to mention something as short-term as the weather could skew things and have an impact. But by presenting quarterly GDP on an annualized basis, it allows one to contrast with any previous GDP and time period.

 

[cashnocredit]

4 hours ago, RVR said:

No, WHO made this claim:

 

Nobody I've seen.

On 8/20/2020 at 9:48 AM, RVR said:

I guess it couldn't possibly be the 33% negative GDP and the more than 28 million STILL receiving some form of unemployment as of today.

 

 

Also, not sure what the complaint is. The BEA could report the quarterly GDP as say $21.54 trillion, but that would be rather meaningless to most people. They could report quarterly GDP as a quarterly gain/loss, but that merely compares it to the previous quarter, again rather meaningless, not to mention something as short-term as the weather could skew things and have an impact. But by presenting quarterly GDP on an annualized basis, it allows one to contrast with any previous GDP and time period.

 

Well, you used the BEA Q/Q annualized change w/o pointing out that there was no way the GDP for the year would decline that much. While you understand the metric, that doesn't mean most would. But now, thanks to @centex and your clarification it's now clear to people not familiar with the BEA methodology.

[RVR]

On 10/20/2020 at 9:59 AM, cashnocredit said:

Well, you used the BEA Q/Q annualized change w/o pointing out that there was no way the GDP for the year would decline that much.

Why would I?

 

NOBODY has ever claimed that GDP for the entire year would decline by the annualized quarterly rate.

 

Quote

While you understand the metric, that doesn't mean most would. But now, thanks to @centex and your clarification it's now clear to people not familiar with the BEA methodology.

I'm afraid your chronology is off.

 

In response to centex falsely accusing me (and unnamed "headline writers") of manipulating the data, it was established that it was merely BEA's standard reporting.

 

After that, you then posted in response to my post that it "in no way indicative that the real GDP for 2020 will decline 35%".

 

But nobody was making the other side of that argument, certainly not me.

~~

 

Well, we will soon see how good the 'headline writers' are at basic arithmetic, when the 3rd QTR report is released.

 

[cashnocredit]

3 hours ago, RVR said:

Well, we will soon see how good the 'headline writers' are at basic arithmetic, when the 3rd QTR report is released.

 

Reasonably well for this story. It also has a nice graph of GDP since 2007 that shows the actual perturbations. Now at about the start of 2019 which isn't bad. Consistent with what I see here with road traffic back to near normal.

 

https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html

[RVR]

On 10/29/2020 at 9:03 AM, cashnocredit said:

Reasonably well for this story. It also has a nice graph of GDP since 2007 that shows the actual perturbations. Now at about the start of 2019 which isn't bad. Consistent with what I see here with road traffic back to near normal.

 

https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html

CNBC is endlessly bullish and frequently wrong. The 33.1% annualized GDP for the 3rd QTR is not a "boom". Real GDP would have to have increased 53% at an annualized rate in the 3rd QTR to return to its previous level, and that would merely get back to even, meaning zero GDP.

 

If you invest $1000 in a stock and it loses 50% of its value, then you're down to $500. If it then goes up 50%, that only gets you back to $750.