Monday, November 9, 2009

Jobless Rate Doubles; Fannie & Freddie Delinquencies Septuple

Click on Chart for a Bigger Image

Here is an update of a set of data that I've been paying attention to for the last year. It compares the unemployment rate (Blue Line), the U6 Broader Unemployment Rate (Purple Line, which includes the jobless, and the people working part-time for economic reasons) with the delinquency rate on Fannie Mae (Red Bar) and Freddie Mac (Green Bar) mortgage loans on single family homes.

The picture isn't pleasing---You can see that as broad unemployment rate increased from less than 10% to 17.5% (in October, 2009)---The delinquency rate on home loans for Fannie & Freddie (which are typically Prime Loans) have increased by almost 6 - 8 Fold!

Let me repeat that---In Late 2006 and Early 2007, the prime mortgages were delinquent at merely ~0.5%. Now Freddie Mac has a 3.33% Delinquency Rate (September, 2009) and Fannie has a Delinquency Rate of 4.45%.

People should remember that in 2007, the economy & markets started tanking because sub-prime mortgages started going delinquent... Granted, those loans were going bust a significantly higher rate than the Freddie & Fannie notes---but also remember that Freddie & Fannie loan out significantly more money than what was ever given out to sub-prime borrowers... I don't have the data, but I'd venture to say that in order-of-magnitude--these loan delinquencies could be as bad or worse than the sub-prime crises.

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