In case there was any doubt, 2007 mortgages are in serious trouble. The Federal Deposit Insurance Corporation’s analysis, which ran in The Wall Street Journal, indicates that .91% of 2007 prime mortgages were “seriously delinquent” (i.e., in foreclosure or 90 days late) after a year, compared to just .33% in 2006. That’s almost a three-fold increase!
Freddie Mac reports much the same, with 1.38% of 2007 loans being delinquent, compared to .38% of 2006 loans.
According to Mark Zandi, chief economist for Moody’s Economy.com, “foreclosures will remain at record highs, the financial system will be under severe stress and the broader economy will sputter.” He goes on to say that more recent loans, those from 4th quarter 2007 and early 2008, seem to performing more successfully.
What this means for resourceful investors is that there are a disproportionate number of distressed 2007 mortgages littering the financial landscape right now. As we’ve already mentioned in this blog, the trading of distressed debt is increasingly popular on Wall Street, and an increasing number of investment companies are making a profit from this practice.
For those who are in a position to invest in these companies, now is the time to do so.
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U.S. Government To Control Fannie Mae and Freddie Mac | Smart-Stock.net
on September 8 2008
[...] It will be interesting to see how the U.S. government manages all these distressed mortgage accounts. [...]