A tough day on Wall Street, with stocks falling 400 points on increased credit concerns over the struggling mortgage lending market. And the news isn't getting any better.
Insurance giant AIG released a report today showing that borrowers in the category just above sub prime are showing increased residential mortgage delinquencies
AIG is a good position to know. The company is the world's largest insurance company and will have its hands full if lenders can't collect from borrowers. It's also one of the largest mortgage lenders in the world. The company says that more than 10% of its sub prime mortgages were 60 days overdue, while 4.6% in the category just above sub prime were late during the second quarter.
In addition, total delinquencies in AIG's $25.9 billion mortgage insurance portfolio clocked in at 2.5%.
Delinquency rates for first mortgages, which represent 90% of AIG's domestic mortgage business, also jumped to 3.89% in June, up from 3.56% in April, AIG says.
Although second-lien mortgages only made up 10% of AIG's mortgage insurance portfolio, it incurred $159 million in the losses during the second quarter.
These mortgages are susceptible to defaults and are especially sensitive to falling home values, the report adds.
With banks and lenders tightening credit, and with borrowers struggling to keep up with payments, the landscape for the rest of 2007 looks rough. The rest of us will just have to ride it out.
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