30 Years of Mortgage Finance

This chart tells the story of US residential mortgage finance over the last 30 years. On the right Y-axis, I have charted delinquency and foreclosure rates, and on the left Y-axis, I have charted the homeownership rate and % of owner occupied homes mortgaged. I have been tracking this chart for more than a year now and with the latest Mortgage Bankers Association National Delinquency Survey, I had to adjust the right Y-axis. I knew it was coming, because the growth rate of the ‘All Loans Past Due %’ has been slowing, but still growing nonetheless and approaching the 10% mark with the Q3 '09 figure. In the survey released last week, this category of loans rose a full half-percent (from 9.94% to 10.44%). I adjusted the scale of the right Y-axis from a max of 10% to a max of 12%. Forever, any historical chart of delinquency rates will have to be based with an upper bound greater than 10% - quite a poignant reminder of the magnitude that our country faces.

Little boxes on the hillside, Little boxes made of ticky tacky,
Little boxes on the hillside, Little boxes all the same.
There's a green one and a pink one And a blue one and a yellow one,
And they're all made out of ticky tacky And they all look just the same.

And the people in the houses, All went to the university,
Where they were put in boxes, And they came out all the same,
And there's doctors and lawyers, And business executives,
And they're all made out of ticky tacky, And they all look just the same.

My girlfriend and I started watching the Showtime series “Weeds” early last fall. The intro song reflects the monotony of SoCal suburbia and urban sprawl. The show depicts the millions of SoCal residents who live in similar communities as living sterile and impersonal lives. Perhaps the show could take on a new meaning? Weeds proliferate in the absence of horticultural grooming. With the widespread blight of foreclosed houses, many of these communities now look like ghost-towns (Lake Elsinore, or communities once-advertised as “convenient to Palm Springs!”). One imagines what sorts of human interest stories have developed in the midst of now vacant tracts. But one day, normalcy will return after this dark economic chapter. Many former homeowners with damaged credit will re-invent themselves and restore their credit, and along with millions of new first time homebuyers, the “shadow inventory” will get absorbed. The above chart will return to normalcy, and the current period will be a painful chapter in the history of modern US residential mortgage finance. But for many Americans this is much more painful than simply re-scaling the right Y-axis.