Subprime 2nd mortgages not doing well for Countrywide

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I can’t imagine they’re making anyone else too much money right now either. Calculated Risk updates us on a bunch of asset backed securities made up of subprime 2nd mortgages originated by Countrywide Home Loans and it ain’t pretty. From the Fitch report:

The impact of the slowdown in the housing market has been particularly evident in highly leveraged subprime borrowers, and delinquency and losses to date for series 2006-SPS1 have been significantly higher than initially expected. After 12 months of seasoning, losses to date as a percentage of the original pool balance are 9.86%. Approximately 14% of the outstanding pool balance is delinquent.

High loan-to-value (LTV) subprime loans consisting of 1st and 2nd mortgage combos were a popular product during the refinancing boom. Cashing out home equity to 95-100% using an 80/15 or 80/20 combo loan was extremely popular and the loans were readily available down to the lowest credit graded borrowers.

It is no wonder that people with little or negative equity in their homes are letting their high interest rate 2nd mortgages go delinquent. What’s the incentive to pay them? Their credit? Hardly! With a mid-500 FICO you don’t stand to lose much by taking some mortgage lates on your 2nd mortgage. Let’s face it-with a 550 or lower FICO score you have either been through a horrific incident which dessimated your credit or you’ve been living on a shoe-string, trying to survive and don’t have much room for error. If your 2nd mortgage adjusts you probably don’t have much left in the paycheck to cover that change.

If you do have a subprime 2nd mortgage and you are incurring late charges and penalties contact your lender and attempt to negotiate a loan work out or forbearance period in order to get your finances in order and take the proper steps to improve your situation.