Delinquency and Default

By the end of May, over 1.1 million subprime and Alt-A loans were at least 30 days delinquent. This represents a delinquency rate of 24.1% of subprime and Alt-A loans serviced. Further, in May 2008 over 620,000 subprime and Alt-A loans were delinquent for more than 90 days. As shown in Figure 1 below, while the rates of delinquency from 30 to 59 days and 60 to 89 days remained relatively constant, delinquencies for 90 days or more past due increased between October 2007 and May 2008.

While not the focus of the State Working Group, another concerning trend is the increasing rate of delinquency and default among prime loans. The number and rate of prime delinquencies has climbed throughout the data collection period, with 5.2% of prime loans at least 30 days delinquent in May 2008, compared with a 3.8% prime delinquency rate in October 2007.

Foreclosure Activity

In May 2008, 305,000 loans were in the process of foreclosure, up 2.3% from the January 2008 level and up 10.9% from October 2007. Loans in the process of foreclosure in May 2008 represent 27.5% of all delinquent subprime and Alt-A loans, up from a figure of 25.5% of delinquent loans in October 2007.

In May 2008, the 13 servicers reported 131,000 foreclosures completed on subprime and Alt-A loans, up 28.2% from foreclosures completed in October 2007. The highest number of foreclosures was reported in February 2008, which saw almost 146,000 foreclosures completed.

B. Loss Mitigation and Loan Modification

Our first two reports found that seven out of ten seriously delinquent borrowers were not in any type of loss mitigation. May 2008 data indicate that this proportion not receiving assistance has increased, with that number rising to nearly eight out of 10 seriously delinquent borrowers not involved in any loss mitigation efforts with their servicers.

Specifically, the data indicate that after increasing through January, February, and March 2008, the portion of loans in loss mitigation declined substantially in April and May. In fact, May 2008 represents the low point in the measurement period with 226,000 loans in loss mitigation. Throughout this period, loss mitigation efforts have not kept pace with the numbers of seriously delinquent borrowers. Only 23.0% of troubled borrowers in May 2008 were receiving any loss mitigation assistance.

Figure 2. Comparison of Seriously Delinquent (60+ days) Loans and Loss Mitigation Efforts In-Process

*Note: The data on seriously delinquent loans has been adjusted downward to exclude data from two servicers who do not currently report loss mitigation in process.