Some stats on subprime crisis!
How big is the Crisis!
The U.S. mortgage market, approximately $11 trillion in size, encompasses about $1.5 trillion, or 15% sub-prime loans. Cheap money caused those loans to balloon as a percentage, particularly over the last two years; even as housing prices stagnated. In 2006, $600 billion new sub-prime loans were originated, compared to $120 billion in 2001, or only 6.5% of the market.
According to Mr. Bernanke
The problems have been most severe for subprime mortgages with adjustable rates: the proportion of those loans with serious delinquencies rose to about 13-1/2 percent in June, more than double the recent low seen in mid-2005.1 The adjustable-rate subprime mortgages originated in late 2005 and in 2006 have performed the worst, in part because of slippage in underwriting standards, reflected for example in high loan-to-value ratios and incomplete documentation. With many of these borrowers facing their first interest rate resets in coming quarters, and with softness in house prices expected to continue to impede refinancing, delinquencies among this class of mortgages are likely to rise further. Apart from adjustable-rate subprime mortgages, however, the deterioration in performance has been less pronounced, at least to this point. For subprime mortgages with fixed rather than variable rates, for example, serious delinquencies have been fairly stable at about 5-1/2 percent. The rate of serious delinquencies on alt-A securitized pools rose to nearly 3 percent in June, from a low of less than 1 percent in mid-2005. Delinquency rates on prime jumbo mortgages have also risen, though they are lower than those for prime conforming loans, and both rates are below 1 percent.
posted by Prashant Pachouri at 10:24 PM
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