Assessing Credit Performance Trends

June 5, 2009

The recent headlines on residential mortgage credit performance have remained gloomy. The quarterly delinquency survey published by the Mortgage Bankers Association (MBA) painted a pretty desolate picture of mortgage credit performance in the first quarter of 2009, and data from outfits such as RealTrac show continued increases in foreclosures, particularly in the Foreclosures Started category. However, a closer look at recent data gives a somewhat different picture. Rising foreclosure rates probably represent both the elongated nature of the foreclosure process and the impact of the various moratoria that expired over the last few months, creating a pig-in-a-python effect. Moreover, other data suggest that mortgage performance appears to be bottoming out, led by the subprime sector, even though home prices remain soft.

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