Bedford, NH – December 11, 2007 – The crisis in the subprime mortgage industry has affected New Hampshire, but not as badly as the rest of the nation, according to a report released by the New Hampshire Housing Finance Authority.
In the 1990s, subprime mortgages – loans made to borrowers with poor credit, large loan amounts, and high debt-to-income ratios – flourished as housing prices skyrocketed but demand for home ownership remained high. According to the study, subprime loans rose from 2% of NH’s mortgage loans in 1998 to 12% by mid-2007. The study, Mortgage Delinquency, Foreclosures, and Subprime Lending in New Hampshire. How Big is the Problem? was published by New Hampshire Housing on December 10, 2007.
“Unfortunately, many subprime borrowers have found themselves squeezed between falling house prices and financial losses caused by divorce, medical bills, and job loss,” said Dean J. Christon, Executive Director of New Hampshire Housing. “The problem is compounded when the mortgage is an adjustable rate loan and the borrower faces an increase in their interest rate.”
Between 2004 and 2007, the delinquency rate for subprime adjustable rate loans more than doubled. By the second quarter of 2007, 20% of subprime adjustable rate loans were past due by one or more payments, compared to only 2% of prime fixed rate loans.
Christon noted, “Borrowers in financial difficulty are faced with a few options. Those with sufficient equity, credit and verifiable income may be able to refinance. Those who can afford the financial loss may sell their property at a reduced price. A limited number of borrowers may be able to renegotiate their loans. For the rest, foreclosure becomes the most likely outcome.”
Since 2004, the foreclosure rate for subprime adjustable rate loans in New Hampshire has roughly tripled. By the second quarter of 2007, a subprime adjustable rate loan was over 25 times more likely to enter foreclosure than a prime fixed rate loan. The rate of subprime loans entering foreclosure is expected to increase steadily to about 900 per quarter by mid-2008.
“Fortunately, foreclosure rates are still below the rates seen in the early 1990s,” said Mr. Christon. “And the number of home owners facing foreclosure does not pose a direct threat to the overall New Hampshire economy.”
The study also found some good news for New Hampshire. Over 95% of New Hampshire mortgagees are current in their payments, and almost 30% of owner-occupying homeowners in the state have no mortgage at all. The loan practices of New Hampshire banks have limited their exposure to the current round of delinquencies and foreclosures.
“The underlying economic conditions in New Hampshire remain healthy,” said Christon, though he cautions that the national crisis in the subprime mortgage industry could pose a threat to New Hampshire’s economy through its effect on large lending institutions, declining confidence in the credit market and the potential for a national recession.
New Hampshire Housing is a non-profit, public benefit corporation established by the State Legislature. The Authority operates a number of programs designed to assist low and moderate income persons to obtain housing. Since its inception, New Hampshire Housing has assisted more than 36,000 families purchase their own homes and has been instrumental in financing the creation of more than 12,000 multi-family housing units.
For Further Information, Please Contact: Jane Law, Communications Administrator
Email: jlaw (at) nhhfa (dot) org
Contact: Laura Simoes
cell: 620-7111, office: 224-5566