Friday, September 26, 2008

Shocking Statistics on Subprime Mortgages

You can find two spreadsheets at the website of the New York Federal Reserve Bank (here) that provide the shocking, state-by-state, statistics for subprime and "Alt-A" [a type slightly less risky than subprime] mortgages for 2008. The numbers are shocking because they show that those mortgages are in far, far, better shape than I had expected.

- Only 8.7% of subprime mortgages, nationwide, are in foreclosure; that number is higher in some states, particularly California and Florida, but, judging by the overheated news media coverage of foreclosures, I'd have guessed the national average was around 50%.

- Those foreclosures represent only 1.8 per 1,000 housing units, nationwide.

- Only 55.2% of the subprimes mortgage holders have been late with a payment even once in the last 12 months, and 57% are current in their payments, as are 81% of the Alt-A holders.

- Only 10% of the subprime holders were 30-to-60 days overdue with their payments.

Remember, these numbers are for the riskiest of all mortgage types, the ones that are at the rotten core of the derivative financial instruments whose failures brought on the current financial crisis. If that's what the worst is like, than maybe the markets and the news media need to take a deep breath and calm down.

Right now, Warren "be fearful when others are greedy and greedy when others are fearful" Buffett's $5 billion investment in Goldman Sachs this week is looking pretty smart to me.

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