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Posts by Frank E. Nothaft

Chief Economist Frank E. Nothaft

Frank E. Nothaft is Freddie Mac’s chief economist. Nothaft is responsible for forecasts, research and analysis of the macroeconomy, housing and mortgage markets. He is also involved in affordable lending analysis and policy issues affecting the housing finance industry.

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What's Driving Mortgage Delinquencies?

A recent survey by the Mortgage Bankers Association (MBA) showed that nearly one in seven American households with a mortgage was delinquent at yearend, meaning they'd missed at least one payment or were in foreclosure proceedings. Moreover, the MBA's fourth quarter 2009 National Delinquency Survey reported that the percentage of seriously delinquent loans (at least 90 days past due or in foreclosure) and the number of loans in foreclosure are at the highest levels recorded in the 40-plus-year history of the survey. The non-seasonally adjusted (NSA) seriously delinquent rate for all mortgages outstanding – which is our primary delinquency metric at Freddie Mac – climbed nearly a full percentage point to 9.7 percent at the end of the fourth quarter.

Compared with the third quarter, the NSA serious delinquency rate increased for all loan types. Not surprisingly, subprime adjustable-rate mortgages had the highest delinquency rates, as these loans dominated subprime origination activity at the height of the boom and carried more high-risk features. More than 40 percent of subprime borrowers with adjustable loans were seriously delinquent at yearend – more than eight times the rate for prime borrowers with conventional fixed-rate loans.

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Are We There Yet?

Children on long trips often cry out, "Are we there yet?" Economists and the public at large have been asking the same question about when the recession will end. With economic growth in the third quarter, signs of a stronger fourth quarter, a sharp decrease in monthly job losses, low interest rates and a stabilization of financial markets, the outlook has been improving steadily since early summer.

Even in the housing sector, which was ground zero for many of the economic troubles during the crisis, signs are looking up. Total new and existing home sales have risen 43 percent through November from their January low and home prices have leveled off in many indexes. And while the national figure took a dip in November, single-family construction has begun to ascend in some markets. We should be "there" in the next few months if we aren't already.

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