Nearly one-third of mortgages responsible for nearly one third of defaults. Reel at 11.

The Wall Street Journal reports:

A survey by the Mortgage Bankers Association found that mortgages on properties that aren't occupied by the owner -- mostly investment homes -- account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast.

Wow! Those investors are a bunch of deadbeats. But wait:

In Nevada, Arizona and Florida, loans for properties that weren't owner-occupied accounted for nearly a third of all home mortgages issued in 2005.

So only in California is that number at all surprising. And it may simply be an outlier; no word on states where defaults by investors are abnormally low.

Comments

NOTE: the WSJ talks about 21 percent to 32 percent of *prime* mortgage defaults.

Think of four categories of loans:

1. owner-occupied, prime (very few defaults)
2. owner-occupied, sub-prime (lots of defaults)
3. investor-occupied, prime (some defaults)
4. investor-occupied, sub-prime (presumably very few loans)

your first fact says that defaults within (3) represent 21 to 32 percent of defaults within (1 + 3).

Your second fact suggests that (3 + 4) as a percent of (1 + 2 + 3 + 4) is "nearly one third"

Different numerator, different denominator.

Posted by Arnold Kling | August 31, 2007 11:03 AM

I hear 40% of sick days are taken on Mondays and Fridays...

Posted by JohnMcG | August 31, 2007 11:54 AM

I haven't read the WSJ link (not a subscriber), but perhaps the point is not the, ahem, shocking revelation that "one-third of mortgages are responsible for nearly one-third of defaults". There's been growing talk about a Federal bailout for defaulting mortgage-holders, and the standard image invoked is poor families losing their homes. In light of this, I don't think it's exactly trivial to point out that a third of the defaulting loans are actually on investment properties.

Posted by Rob Leder | August 31, 2007 1:26 PM

Math isn't my strong suit, but it seems like it's important to realize that not every mortgage that's being defaulted on was issued in 2005. My guess is in years before that, the percentage was much lower. So when you look at the percentage of mortgages that are investor properties in default compared to ALL mortgages, not just 2005 mortgages, it would probably be way higher.

Posted by madanthony | September 1, 2007 10:46 AM