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Washington
GAO Problems in nonprime loan market slow to disappear
WASHINGTON (9/30/10)--Recent government analysis of loan performance and default factors associated with nonprime mortgages originated from 2000 through 2007 shows a 27% increase in the numbers of such loans that were seriously delinquent at the end of 2008, compared with 2007. In a Government Accountability Office (GAO) report titled “NONPRIME MORTGAGES: Analysis of Loan Performance, Factors Associated with Defaults, and Data Sources,” the government noted as background that “the surge in mortgage foreclosures that began in late 2006 and continues today was initially driven by deterioration in the performance of nonprime (subprime and Alt-A) loans.” Those loans, the analysis said, increased dramatically from 2000 through 2006, jumping from about $125 billion--or 12% of all mortgage originations--to about $1 trillion, or 34% of originations. “The number of nonprime loans that were 90 or more days late grew throughout 2009, accounting for most of the overall growth in the number of serious delinquencies. By comparison, the number of active loans in the foreclosure process grew in the first half of the year, and then began to decline somewhat. Additionally, 475,000 nonprime mortgages completed the foreclosure process during 2009. “The persistently weak performance of nonprime loans suggests that problems in the nonprime market will not be resolved quickly, and underscores the importance of federal efforts to assist distressed borrowers and prevent a recurrence of the aggressive lending practices that helped precipitate the foreclosure crisis,” the GAO report said. For more, use the resource link to access the report.
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