It wasn’t so long ago when you could hear people complaining that the market was irrational when it came to the pricing of highly rated mortgage backed securities. We haven’t heard too much of that lately, and thank goodness.
Delinquency rates on so-called “non-agency” mortgages have soared to a record high of 24.13%. In plain English, that means that nearly one quarter of all mortgages not backed by the government in some way are at least 30 days delinquent. The “non-agency” market, which was once relatively small, overtook the agency mortgage market in 2005. It now represents something like 45% of all outstanding homeloans.
The worse levels of delinqecy come, of course, in the subprime market. Nearly 40% of subprime loans are at least 30 days delinquent. Around 24% of Alt-A mortgages are delinquent. In the prime market, delinquencies have soard from just 2.22% two years ago to 12.87% today.
But you don’t have to take our word for it. Read Bloomberg’s chart to see the full horror.