No one really has a clue how much money will be lost on subprime mortgages. Estimates range from $400 billion to $1 trillion and more. The banks, hedge funds and insurers whose financial futures depend on those final numbers are focusing most intensely on monthly data on delinquencies, housing prices, interest-rate resets, and the "roll rate", which shows how many borrowers are falling further and further behind on their payments.
"Right now, we're still right in the middle of it, and so you have enormous variation using very small differences in assumptions about what's going to happen", says Jay Brown, chiefs executive of MBIA, Inc - a bond insurer that sold protection on mortgage-linked bonds, and took a write-down of more than $3 billion in 2007.
For typical subprime mortgages issued between the second half of 2005 and the first half of 2007, when underwriting standards were at their weakest, between 25% and 40% of borrowers on average are more than 60 days behind on their payments.
Nearly 15% of subprime borrowers who took out mortgages in 2006 were 60 days late within a year. It took nearly twice as long for loans from 2000 and 2001 to look that bad. Overall, the number of delinquencies is still rising each month. Will the loans follow the same path as in previous years? In 2000 and 2001, the growth in the 60-day delinquency rate slowed when those subprime loans were about three years old and peaked after a little more than four years, then started to fall.
"Right now, we're still right in the middle of it, and so you have enormous variation using very small differences in assumptions about what's going to happen", says Jay Brown, chiefs executive of MBIA, Inc - a bond insurer that sold protection on mortgage-linked bonds, and took a write-down of more than $3 billion in 2007.
For typical subprime mortgages issued between the second half of 2005 and the first half of 2007, when underwriting standards were at their weakest, between 25% and 40% of borrowers on average are more than 60 days behind on their payments.
Nearly 15% of subprime borrowers who took out mortgages in 2006 were 60 days late within a year. It took nearly twice as long for loans from 2000 and 2001 to look that bad. Overall, the number of delinquencies is still rising each month. Will the loans follow the same path as in previous years? In 2000 and 2001, the growth in the 60-day delinquency rate slowed when those subprime loans were about three years old and peaked after a little more than four years, then started to fall.
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