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As I was researching today’s story on foreclosures and risky loans, I spoke with the keeper of the statistics for FirstAmerican Loan Performance, Mark Carrington.

He’s calculated that for the loans he examined through November, the 2006 totals of interest-only and negative-amortization mortgages reached a 67-percent share of the market.

(He clarified that Loan Performance’s data doesn’t represent an entire market picture, but an 80 percent share of the “securitized” market, or those purchased in pieces by investors.)

So he broke his data down, quarter by quarter, since the beginning of 2003. My techno-wiz desk neighbor, Vladimir Kogan, plopped those numbers into a graph. Check it out:

An important thing to remember is that the number of loans in each quarter isn’t necessarily consistent. Carrington’s calculations for three quarters in 2004 examined more than 20,000 loans, while quarter two and quarter three last year only had 9,563 and 6,134 loans, respectively.

In the first quarter of 2003, only 0.37 percent of the 11,896 loans originating were negative-amortization — the kind of loan where borrowers pay just a portion of the interest accruing on the loan each month, meaning their debt actually grows. Added to the interest-only loans, which made up 17.74 percent, the share of the mortgage market belonging to loans where borrowers were not touching the principal of the loan was just above 18 percent.

Compare that to the third quarter of 2006, when 29.92 percent of the 6,134 loans originating were neg-am, and 36.58 percent were interest-only. Here’s another graph that demonstrates how significant the growth in the negative-amortization market has been since 2003.

It’s interesting to see how these loans have grown in popularity and continue to grow despite a slowing market. Their initial low payments became popular while borrowers were counting on their homes appreciating in time to refinance or sell at a profit and avoid the substantially higher payments a few years down the road. Now that home values have stabilized or dropped in most neighborhoods, borrowers may not have that same safety net available when their payments start to rise.

KELLY BENNETT

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