What One Lender's Deliquencies Look Like

Rodger Rafter of Motley Fool scoops the Mainstream Media on Novastar's Delinquencies






If you want to see what the bankers want you to rescue them from, then pay attention.

I am a big, big fan of Motley Fool's "METAR" discussion board, and I've been away for too too long.

I logged on tonight after coming home from work.

One of the most recommended posts from yesterday is one by a man who goes by the alias of Rodger Rafter.

What Rodger has uncovered with his usual web based investigating is something which the mainstream media is missing as it gets on its knees to kiss the collective butts of everyone in government and banking who are now requesting a $700 Billion bailout.

How to find Rodger's post on Motley Fool:

What you are about to read is Rodger's latest post, "Inside the Toxic Pool". I will not comment on this post this morning. I am simply going to lay it on you to show you the kind of brilliant minds which post regularly to Motley Fool's "METAR" board. (METAR stands for Macro-Economic Trends and Risks).

That said, I'm out of here. But you need to read this post here and now.

Compare month over month growth at one lender, Novastar, and see for yourself how bad the current Recession is, and how bad it will become . . . has to become . . . as foreclosures geometrically expand at what appears to be the speed of an investment banker's Tesla making it's way from Wall Street to the Hamptons on a Friday evening.

This post appeared October 1, 2008 on the METAR board at Motley Fool.
It was post #256820.

Click on the red highlighted sentence above and you will be taken to the original post and will also see responses to Rodgers Original Post.

Even if you are not a registered Fool, you can still read the post. But I would advise one and all of to join Motley Fool's discussion boards (now FREE) and look up the METAR board as soon as possible and learn how to protect your wealth.

I will not make any more comments on this data other than you stop, look over, look at the geometrical growth Month over Month (Rodger focuses mostly on month to month).

Compare January 2007 to January 2008. Compare February 2007 to February 2008. Look at the raging growth in late payments and foreclosures year over year.

That said, here's Rodger Rafter (his alias on Motley Fool) in all his glory showing Americans why the bailout is fruitless in its current form. All of Rodger's work is presented below in blue ink:

Inside a Toxic MBS Pool
Author: RodgerRafter
Motley Fool's METAR Message Board
10/1/08 12:15 PM
#256820

My note: everything printed here on out is Rodger without any interruption:)

So what kind of toxic waste would Paulson's buddies like to sell to the taxpayers? You know, the stuff they're saying we could actually make a profit on?

A look inside one of the mortgage pools shows how incredibly bad things are for these types securities:

https://www.novastarmortgage.com/BondRemittance.aspx
Table for the 2006-5 pool includes:

Payment Month
Total Delinquencies (including REO) as a percentage of outstanding principal
Percentage of balance 1 payments behind *(1PMT)
Percentage of balance 2 payments behind*(2PMT)
Percentage of balance 3 or more payments behind, but not yet foreclosed or in bankruptcy*(3PMT)
Percentage of balance in foreclosure *(Del.Fore.)
Percentage of balance held as Real Estate Owned after foreclosure *(REO)
*(Note: asterisks show my notes in parentheses to foster quicker understanding)

Month Total 1 PMT 2 PMT 3+ Del. Fore. REO
Sep-06 2.31% 1.32% 0.95% 0.00% 0.10% 0.00%
Oct-06 2.78% 0.90% 0.92% 0.07% 0.78% 0.16%
Nov-06 4.90% 2.43% 0.73% 0.21% 1.25% 0.19%
Dec-06 6.98% 2.93% 1.67% 0.18% 1.65% 0.32%
Jan-07 9.43% 3.15% 1.81% 0.31% 3.27% 0.46%
Feb-07 10.38% 2.23% 2.34% 0.34% 3.82% 1.09%
Mar-07 11.95% 2.54% 1.44% 0.64% 5.34% 1.42%
Apr-07 14.39% 3.25% 2.06% 0.45% 6.12% 1.95%
May-07 16.30% 3.01% 2.47% 0.46% 6.65% 2.67%
Jun-07 18.71% 3.29% 2.44% 0.72% 7.78% 3.57%
Jul-07 20.74% 3.53% 2.24% 0.72% 8.64% 4.51%
Aug-07 22.59% 3.65% 2.38% 0.80% 8.85% 5.69%
Sep-07 25.35% 4.53% 2.71% 0.86% 9.32% 6.78%
Oct-07 26.90% 4.57% 2.57% 1.92% 9.26% 7.42%
Nov-07 30.91% 5.58% 3.52% 3.65% 8.22% 8.55%
Dec-07 35.64% 6.57% 4.41% 6.66% 7.10% 9.38%
Jan-08 37.90% 5.09% 5.20% 10.15% 6.30% 9.46%
Feb-08 38.36% 4.40% 3.49% 11.48% 7.95% 9.12%
Mar-08 39.79% 4.71% 2.81% 11.97% 9.70% 8.50%
Apr-08 41.64% 5.29% 3.64% 12.85% 10.04% 7.86%
May-08 43.49% 5.30% 3.73% 6.81% 18.33% 7.31%
Jun-08 45.40% 5.16% 4.21% 8.50% 19.00% 6.40%
Jul-08 47.32% 5.47% 3.57% 10.85% 19.23% 5.96%
Aug-08 49.46% 5.10% 4.21% 12.34% 19.67% 5.74%

Almost 50% of loans in the pool are non-performing, and that number is increasing at an escalating rate. Losses haven't been realized on most of these loans yet, and the servicers have been dragging their feet through the whole foreclosure process.

Looking at the historical waves of activity:September '06, securities are sold and already more than 2% are delinquent. Some of these borrowers probably refinanced an old delinquent loan and never made a payment on the new one.

November '06 to January '07, the first wave of defaults starts as people choose heating and holiday gifts over mortgage payments.

Delinquencies begin rising at a record rate for a new Novastar mortgage pool.January '07 to March '07, the servicers promptly begin the foreclosure process on the first wave of defaults.
February '07, a down month for new delinquencies, as almost everyone who made it through the winter stays current.

April '07 and beyond, delinquencies pick up as credit tightens for subprime borrowers, cutting off access to easy refinancings.

May '07 to January '08, REO starts to swell as the servicers aren't willing to sell property quickly at a low price.

October '07 to January '08, foreclosure numbers decline, but 3+ payment delinquencies soar as the servicer holds off on foreclosures. Reduced foreclosure numbers only look good if investors don't look too closely. Down the road losses will be worse because of the foreclosure delays.
November '07 to January '08, the second wave of holiday defaults is much more severe than the previous year's.

January '08 to August '08, REO numbers decline, as properties are sold faster than new foreclosures are completed. The pool begins recognizing monthly losses.

February '08, the annual down month is still twice as high as February '07 for 1 payment missed. Some of these probably missed a payment earlier but still made their February '08 payment.

April '08, defaulted loans that haven't been foreclosed on hit a peak of 12.85%, but foreclosures have also started surging again.

May '08, the servicers decide to just foreclose on a big chunk of defaults, starting a big wave of foreclosures.
June '08 to August '08, delayed foreclosures climb again. Foreclosures continue to rise.
September '08, the big wave should start hitting REO.

November '08 to January '09, the next big wave of defaults should begin with the economy tanking and heating costs high.

Any wonder why Paulson is in such a rush to get as much of the load off of Wall Street and onto the taxpayer as quickly as possible?

With millions of unsold homes on the market, hundreds of thousands working their way through the foreclosure process, and the biggest default wave yet to come, the housing market has a longway to go before it hits bottom.