Late Payments on Subprime Loans Soar in 2006

by Mike Bevel, CollectionIndustry.com

Sure, that recent housing boom was exciting for sellers. All of a sudden, rat-infested cardboard boxes were going for the high six figures – and if you were near a Barnes & Noble, you could add a couple extra grand to the asking price.

And folks would pay.

Kind of.

Folks would pay with a variety of loans that could best be described as “sketchy” and still everyone was happy because houses were selling and money rolled in like greased fat kids on a slide and then all of a sudden: not so much with the housing boom. All of a sudden: late payments and foreclosures.

According to the Wall Street Journal, among others, late payments on subprime loans have surged. While economists don't expect major harm, a continued rise could hurt investors in mortgage-backed securities.

Subprime mortgage originations climbed to $625 billion in 2005 from $120 billion in 2001, the WSJ said, citing Inside Mortgage Finance, a trade publication.

Based on current data and performance trends, 2006 could go down as one of the Worst. Years. Ever. for subprime loans (“Miss Congeniality” and “Most Improved” already being taken). Roughly 80,000 subprime borrowers who took out mortgages packaged into securities this year are behind on their payments.

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