The troubled American Mortgage industry suffered a further set back yesterday with record levels of defaults. The concerns created in the US housing market set share prices tumbling over renewed fears of the prospects of an impending US recession
The Mortgage Bankers Association revealed that
4.95pc all loans tracked were in arrears of 30 days or more, the highest since the depths of the 2002 recession. Deliquencies on sub-prime loans have reached 13.3pc, even though the economy has barely begun to slow.
Furthermore with falling house prices US Federal Reserve governor Susan Bies said the problems in the sub prime mortgage industry would deepen. This is because many were bought on the assumption of rising house prices. For example some in the sub prime industry bought interest only mortgages, or got a mortgage with a heavily discounted period for first 6 months.
As house prices fall it makes it more difficult to deal with mortgage arrears