Bangkok--19 Aug--Standard & Poor's
In the first quarter of 2010, housing finance agency (HFA) delinquencies declined for the first time since overall performance of loans began to deteriorate in the second quarter of 2008. Standard & Poor's Ratings Services believes that the extension of the home buyer tax credit, which has now expired, may have helped minimize new defaults and slow the rate of cumulative defaults, according to a report published today.
Declining home prices have contributed to higher delinquency rates, as homeowners either have limited options for selling their residence or refinancing their loan, or simply decide not to continue making payments on an asset that is worth less than what is owed.
"We believe that declining mortgage applications for home purchases, slower sales following the expired tax credit, more distressed home sales, a large backlog of distressed properties that haven't been marketed for sale yet, and a high unemployment rate may further hamper home prices," said Standard & Poor's credit analyst Lawrence Witte. "As a result, and despite the decline, we believe that default rates on HFA loans may increase again in the second quarter of 2010."
Loans associated with 33 major whole-loan bond resolutions had an average reduction in delinquency of 0.52% from the fourth quarter of 2009, while delinquencies of similar state portfolios declined by an average of 0.35% during the same time period. Delinquency rates for HFA loans remain high with an average increase of 1.67% from the first quarter of 2009 to the first quarter of 2010. However, our analysis for the first quarter of 2010 indicates that the overall percentage of HFA loans at least 60 days delinquent or in foreclosure decreased to 6.05% from 6.57% in the fourth quarter of 2009.
At present, we are uncertain as to whether temporary factors such as the expired home buyer tax credit program had an impact on the decline of delinquency rates. According to David Wyss, difficulties restructuring loans and the delays in the foreclosure process will likely lead to bringing foreclosed homes on the market for another 18 months. Additional foreclosures could put more pressure on home prices, possibly affecting loans in HFA portfolios. We believe this could lead to more increases in HFA delinquency rates. The stimulus package aided growth in the economy in early 2010, but we except the impact of stimulus to decrease over the next year or two. We expect that HFA delinquencies will likely remain high without a decrease in unemployment and economic improvement. Seasonally, housing typically performs well in second and third quarters, which may help lower delinquencies in the near future. We don't expect fluctuations in delinquency rates alone to cause ratings action at this time.
The report is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Lawrence Witte, San Francisco (1) 415-371-5037
Alexis Laing, San Francisco (1) 415-371-5019
Valerie White, New York (1) 212-438-2078