In a filing with the Securities and Exchange Commission yesterday, Countrywide Financial Corp. (NYSE:CFC
) disclosed that subprime delinquencies have reached just above 19 percent -- a 25 percent increase from one year ago. Subprime mortgages comprise nearly 10 percent of the company's reported $1.3 billion servicing portfolio; Countrywide is the nation's largest subprime servicer.
Pending subprime foreclosures increased more dramatically, skyrocketing 74 percent from year-ago levels to 3.53 percent of of the total loan portfolio. Foreclosure activity increased across all reported segments of Countrywide's servicing portfolio: conventional, nonprime, prime home equity and government-insured mortgages.
Total deliquences across Countrywide's portfolio reached 5.02 percent, up from 4.61 percent one year earlier, driven primarily by the increase in subprime delinquencies. The vast majority of the company's loans are conventional, however, with $1.06 billion of the total servicing portfolio comprised of conventional loans.
In a signal that subprime troubles may be spilling over into other credit sectors, late payments on prime home equity loans also increased at the Calabasas, Calif.-based lender, reaching 2.93 percent in 2006 versus 1.57 percent in 2005.
Home equity loans will traditionally show delinquency patterns ahead of first-lien prime mortgages, as borrowers in distress will often opt to pay their mortgage first. First-lien prime mortgages also saw a modest uptick in deliquencies, according to Countrywide, up from 2.60 percent in 2005 to 2.76 percent during 2006.
While Countrywide's report was somewhat of a revelation to investors, driving the stock down nearly 2 percent in early tradthe company's disclosure is likely to be echoed by many subprime mortgage banking operations.
Troubled subprime lender NovaStar (NYSE:NFI
), who recently reported a $14.4 million fourth quarter loss due primarily to loan repurchases, disclosed in its 10-K filing yesterday that pending foreclosures on its loan portfolio had reached 2 percent of the company's total servicing portfolio, nearly 38 times greater than year-ago levels. REO also skyrocketed, increasing to levels more than 19 times greater than during 2005.