I had a couple of things that didn’t fit into today’s story on the local effects of subprime lending.

I’d reported some stats on the performance of subprime mortgages — loans made to consumers with imperfect credit — in San Diego. Here are those from today’s story:

Nearly 10 percent of the active mortgages in San Diego County in December 2006 were subprime, according to First American LoanPerformance. The share of the mortgage market consumed by subprime loans has dropped some since December 2004, when they accounted for 12.3 percent of the active loans in the region. In December 2005, subprime loans comprised 9.5 percent of the active mortgages. …

It has become more and more common for San Diego homeowners holding those subprime mortgages to fall into foreclosure. The percentage of people in that category who’ve missed at least two of their mortgage payments has risen from 1.7 percent of the subprime pool in December 2004 to 11.3 percent in December 2006, according to First American LoanPerformance.

Now, here are those same stats for the whole country, from First American LoanPerformance. It appears subprime loans have been a bit more popular as a share of the nation’s active mortgages than they’ve been in the San Diego loan pool.

Subprime loans accounted for 14.7 percent of the active loans in the country in December 2006, up slightly from the 14.6 percent share of loans that were subprime in December 2005, and from 13.1 percent in December 2004.

And since 2004, the percentage of such loans slipping into foreclosure has increased. Homeowners who’ve missed at least two payments on their subprime loans comprised 11.8 percent of the active subprime loans in December 2006, compared to 7.7 percent in December 2005 and 6.7 percent in December 2004.

Yesterday I spoke with Christopher Cagan, a researcher with FirstAmerican who monitors loan resets — that moment when adjustable-rate type loans switch from the introductory low payments to higher, fully-indexed payments.

He said he doesn’t expect a “terrible crash” from the subprime belt-tightening, but added prices could drop as some people find themselves unable to refinance out of challenging loan terms.

The marketplace — those investors who are urging lenders to tighten their standards — is doing a good job of regulating subprime mortgage lenders now, Cagan said. He said those “Bankrupt? No Problem” mortgages never quite sat well with him when they were getting popular during the housing boom days.

“To me, bankruptcy is a problem and you should wait a couple of years,” he said.

For homeowners stuck in a loan or thinking about purchasing a home, Cagan said such folks would be wise to rein in some of the free-money ideas of the housing boom and think of their homes as places to live in, not investments, similarly to how a couple of generations past thought of real estate, he said.

“Survive and get through and understand what you’re in,” he said. “Listen to your grandmother and come out fine.”

I’ll try to find Grandma and ask her what she thinks about condo conversions and get back to you.


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