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Friday, August 21, 2009

We are all Subprime now.

*I have been saying for a year now that prime mortgages are not only much larger than subprime, but also are defaulting at a much faster rate. CalculatedRisk has put together some charts to prove the point. The question becomes: when is the banking sector going to have to writedown these good to bad loans and let us investors see just who isn't insolvent by getting the government out of the making a market for banks business. The answer? Never. The federal government under Helicopter Ben and Treasurer Geithner will cover their arses by buying up all the mortgages. Fannie and Freddie will look like WalMart and the Dollar Store. Get used to it fellow taxpayers: We are all SUBPRIME now!

This graph shows the U.S. mortgage market by type. There are about 45 million loans included in the MBA survey, and that is about 85% of the U.S. market.
This is a general breakdown, and apparently Alt-A is included in Prime (it would be helpful to break that out).

The second graph shows the breakdown by type for loans that are either seriously delinquent (90+ days delinquent) or in the foreclosure process. There are about 3.6 million loans in this category.

Clearly subprime is disproportionately represented (much higher delinquency rate), but now over half the loans in this category are Prime - and the delinquency rate is growing faster for Prime. This is now a Prime foreclosure crisis.

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