Interesting look into foreclosures

From the Denver Post:

Nonbank lenders lead foreclosure data

The standard profile of a mortgage that went into foreclosure in Colorado last year: an adjustable-rate loan with an average value of $202,000 made by a nonbank lender between 2003 to 2005.

That’s the conclusion of a survey of 374 randomly chosen foreclosure filings released Wednesday by the Colorado Banker’s Association.

“These are not big loans on high-end properties,” said Don Childears, president of the Colorado Bankers Association.

They also aren’t, for the most part, loans being made by banks. Only about 22 percent of foreclosed loans in the study were originated by a bank or bank affiliate.

The bulk of mortgages going bad in Colorado are originating with nonbank lenders who don’t have the same regulatory oversight that banks face.

A growing number of “subprime” lenders nationwide that targeted less credit-worthy borrowers have closed their doors, curtailed their lending activity or have suffered large drops in their stock market value in recent weeks.

Concerns are also emerging about rising delinquencies in the next tier above subprime loans, known as Alt-A.
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The CBA study found that the average age of a loan going into foreclosure was only 2.8 years, and that borrowers had paid down 3 percent of the mortgage amount. Nearly 8 out of 10 of the foreclosures involved adjustable-rate mortgages.

Many ARM loans adjust to current interest rates three or five years after the original loan. But some are going bad well before that.

“You may be looking at people who couldn’t handle the original payment,” Childears said.