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Report: Subprime and Alt-A Loss Severity Hits 64.7% in June

By Anonymous

From Gretchen Morgenson at the NY Times: So Many Foreclosures, So Little Logic

Alan M. White, an assistant professor at the Valparaiso University law school in Indiana analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo.
...
In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.

Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. ...

Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.

Well, it is an article by poor Gretchen, so we need to highlight a funny...

Loan modifications occur when a lender agrees to change terms of a troubled borrower?s mortgage; the most common approach is to reduce the loan?s interest rate. ... Lenders and their representatives, however, don?t like to modify loans through interest rate cuts ...

I guess they don't like doing the most common approach!

Note: the database analyzed by Professor White is for subprime and Alt-A only, whereas the OCC data includes prime loans - so it is hard to compare. Here is the OCC report for Q1: OCC and OTS: Prime Delinquencies Surge in Q1
And a couple of earlier posts on the OCC report:

OCC and OTS: Prime Delinquencies Surge in Q1

Modifications and Re-Default

Full post as published by Calculated Risk on July 04, 2009 (boomark / email).

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