According to the MBA's statistics approximately 11% of subprime loans are used by first-time homebuyers.
Last week MBA stated that "Today, homeownership stands at 69 percent because many people not able to get credit in the past have gotten the opportunity to borrow money. And, our data demonstrates that 87 percent of borrowers with subprime loans are paying their mortgages on time and enjoy the benefits of homeownership." MBA tracks 43.5 million loan database, including subprime, to track industry trends and statistics.
The Center for Responsible Lending
The Center for Responsible Lending points out that this means "loans in the subprime market are typically debt consolidation refinance loans and do not create new homeownership opportunities.
Loans that borrowers cannot afford do not lead to lasting homeownership. Comparing an 11% increase in homeownership with projected default rates of 19.4% for recent subprime loans; subprime lending appears to result in a NET LOSS of homeownership in its current form.
In addition, most borrowers who get subprime loans later refinance into new subprime loans, and many of these will also be foreclosed upon. Following the borrower through subsequent loans rather than just looking at that first loan, CRL roughly estimates in Losing Ground that actual subprime borrower foreclosure rates will be over 35%." CRL's research is based on the performance of more than six million subprime loans originated over a seven-year period.
Most sobering is the CRL prediction that "... one out of five (19 percent) subprime mortgages originated during the past two years will end in foreclosure. This rate is nearly double the projected rate of subprime loans made in 2002, and it exceeds the worst foreclosure experience in the modern mortgage market, which occurred during the 'Oil Patch' disaster of the 1980s."
Suggested Corrective Action
This past week, in testimony before the House, MBA Chairman John M. Robbins stated that "Working together, I suggest we must accomplish three things. (1) We must stabilize the subprime mortgage credit system; (2) provide assistance for homeowners facing foreclosure; and (3) finally prevent this from ever occurring again. Sound perspective and a prudent regulatory hand will soothe investors, calm editorial writers and help consumers."
Key Economic Reports Released This Week
RELEASE
DATE
ECONOMIC
INDICATORS
RELEASED
BY
CONSENSUS
Wt.
INFLUENCE ON
INTEREST RATES
Mon 04/02
10:00 am et
ISM (NAPM) Index for March '07
National Association of Purchasing Mgt.
51.2%
**
If above consensus If below consensus
Mon 04/02
1:00 pm et
Weekly Bill Auction
Dept. of the Treasury
N/A
**
If strong demand If weak demand
Tue 04/03
Motor Vehicle Sales for March '07
Automobile Manufacturers
Vehicles 16.5M
**
Undetermined
Wed 04/04
7:00 am et
MBA Mtg Apps Survey for week ending 03/30
Mortgage Bankers Association of America
N/A
*
Undetermined
Wed 04/04
10:00 am et
Factory Orders for February '07
Bureau of the Census
Dept. of Commerce
2.0%
*
If above consensus If below consensus
Wed 04/04
10:00 am et
ISM Index (Non-Mfg) for March '07
National Association of Purchasing Mgt.
55.0%
**
If above consensus If below consensus
Thu 04/05
8:30 am et
Jobless Claims for week ending 03/31
Bur. of Labor Statistics
Department of Labor
320K
*
If above consensus If below consensus
Fri 04/06
8:30 am et
Employment Report for March '07
Bur. of Labor Statistics
Department of Labor
Payrolls 120K
Unemp 4.6%
****
If above consensus If below consensus
Fri 04/06
10:00 am et
Wholesale Trade for February '07
Bureau of the Census
Dept. of Commerce
0.4%
**
Undetermined
Fri 04/06
3:00 pm et
Consumer Credit for February ' 07
Federal Reserve Board
$5.0B
*
If above consensus If below consensus
* Low Importance
** Moderate Importance
*** Important
**** Very Important
This Economic Report was sent to: galand@galandhaas.com
If above consensus 
If below consensus 
