This chart shows the loss severity for subprime first-lien mortgage loans in the tri-state area (New York, New Jersey, and Connecticut). Loss severity is defined as the average size of a loss if one occurs. A loss occurs when a foreclosed home sells for less than what the borrower owes to the mortgage lender. The amount of that loss includes the costs to foreclose and liquidate, as well as taxes and declines in property value. This report uses all securitized nonprime mortgage loans from First American CoreLogic’s Loan Performance data set.
Source: Fed U.S. Credit Conditions
How is a 0.7 % loss scary ? Or is it 70 % ?
70%
I am still not certain what scale the left axis is using… Even after tracking down the original data source…
http://data.newyorkfed.org/creditconditions/#
Loss Severity, Subprime First-Lien This chart shows the loss severity for subprime first-lien mortgage loans in the tri-state area (New York, New Jersey, and Connecticut). Loss severity is defined as the average size of a loss if one occurs. A loss occurs when a foreclosed home sells for less than what the borrower owes to the mortgage lender. The amount of that loss includes the costs to foreclose and liquidate, as well as taxes and declines in property value. This report uses all securitized nonprime mortgage loans from First American CoreLogic’s Loan Performance data set.
READ THIS FIRST: Data and Methodology »
Loss Severity Charts – These charts show expected losses thirty-six months from the most current date by market or by market and asset class. Expected losses are calculated using the probability of loss thirty-six months from the most current date; this calculation assumes that the most recent transition matrix and loss severity for each date persists for the next thirty-six months ^5. The charts illustrate this past projection for each historical remittance date.
^5 Expected loss = loss frequency * loss severity, where loss frequency is the number of losses per number of exposures.
It can’t go much higher. Quite a graph.
It’s obviously 70%, but is it really surprising? I believe the price of these securities have been reflecting this for more than a year. Now if banks haven’t marked them down appropriately, that could be a problem. I guess we’ll have to wait for Q1 results to see about that.
yes, it is 70%, the axis on some fed charts is mislabelled.
For the past two years the loss has escalated from 10% to 70%. Quite a significant number to recon with.
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