Upside Down in the States

Financial Justice Ideas and Issues Personal Writings

New York    Visiting with my Dad yesterday afternoon in New Orleans he asked me if I had seen his comment on one of my recent blogs about the subprime disasters.  I had not.  He directed me to a small article and a box chart in USA Today that he had read because it had been mistakenly delivered to his house over the weekend.

    The piece was a report put out by our old “friends” the Mortgage Bankers Association, noting the fact that foreclosure proceedings are setting new records during the spring quarter.  These guys lack any sense of irony, since ACORN met with them repeatedly and listened to a record number of excuses for why they were not doing anything when they had a chance to take some steps and get ahead of this train wreck.  In fact I had better check, because I think they still owe us a current response on our best practices.

    But, anyway, here’s the pain report from the MBA.  Nearly 17% of borrowers with subprime ARMs (adjustable rate mortgages) were behind on their payments in the second quarter.  For all loan types 5% of borrowers — nearly 2.5 million people — missed at least one payment in the last quarter.  

    There are seven states driving the crises.  Michigan, Ohio, and Indiana account for nearly 20% of the foreclosures largely due to job losses.  Rising defaults in California, Nevada, Florida, and Arizona account to the soaring delinquency rate though.  In those four states people are now upside-down, meaning that with the falling value of homes recently, they now owe more money than their houses are worth.  Gulp!  Louisiana and Mississippi are also horrors still reeling in the wake of the Katrina two years ago.

    To give you a better sense of how the problem plays out in the states, here is the list of all of the states that are at or worse than the 17% average behind the 8 ball on their subprimes.

*    States                All Loans        Subprime ARMS
*    Alabama                6.2%            22.3%
*    Arkansas               5.4%            19.9%
*    Connecticut           4.1%            17.8%
*    Georgia                 6.9%            19.7%
*    Illinois                   5.1%            17.0%
*    Indiana                 7.0%            19.3%
*    Iowa                     4.2%            19.3%
*    Kansas                 4.6%            17.9%
*    Kentucky              5.7%            19.1%
*    Louisiana             7.3%            22.5%
*    Maine                   4.7%            19.3%
*    Massachusetts     4.5%            19.8%
*    Michigan               7.6%            23.9%
*    Mississippi            9.3%            26.9%
*    Missouri                5.6%            22.3%
*    Nebraska             4.3%            18.7%
*    New Hampshire   4.3%            20.4%
*    New Jersey          4.3%            17.0%
*    North Carolina     5.5%            18.6%
*    Ohio                    6.7%            19.3%
*    Oklahoma           5.4%            17.8%
*    Pennsylvania      5.6%            19.6%
*    Rhode Island      5.0%            20.4%
*    South Carolina   5.7%            17.9%
*    Tennessee         6.6%            22.2%
*    Texas                 6.5%            18.7%
*    West Virginia     6.8%            26.1%
*    Wisconsin          4.0%            18.0%

    As you can see, in the South we ate up these subprime loans like candy.  Finally, we could get loans, and clearly we signed the papers like wild.  

    What has to be frightening is that the upside-down states are still not leading the way.  Califonria is at 3.6 overall and 14.2% subprimes, Arizona is 3.6 and 11.2%, Florida is edging up to 5.2% and 16.1% subprimes, and Nevada is 4.4% and 12.2%, but these states have been leading the growth in populations and home construction so the total number of loans and problem loans is moving to hella-levels.