Conforming ARMs Are Going Delinquent More Rapidly Than Sub-Prime ARMs

By eSave Mortgage | March 14, 2007

The Mortgage Bankers Association released a report yesterday detailing how mortgage-holding homeowners are meeting their obligations.

The statistics were a major factor in the Wall Street sell-off yesterday as investors increasingly grow nervous that sub-prime mortgage defaults will spill over into other credit markets and take the economy with it.

The report stated that fourth quarter sub-prime mortgage delinquency rates increased to 14.44% from 13.22%.

This is a 9% jump.

But (as we should always do with statistics), let’s go a little deeper.

The report also listed data on non-sub-prime loans. The delinquency rates on these “other” mortgages was even worse! Delinquencies rose from 3.06% to 3.39%.

This is a 10.78% jump.

You would never know it without looking deeper into the numbers, but conforming ARMs went delinquent in Q4 with more vigor than sub-prime ARMs.

Either way, so long as markets are worrying about credit markets, it will siphon money out of stocks and into bonds. Added demand for bonds usually helps to keep mortgage rates low so there may be silver living here after all.