About 11 percent of subprime borrowers in metro Denver have lost their homes to lenders via foreclosure, more than double the rate nationally.
And another 15 percent are either in foreclosure or more than 90 days late on their mortgage payments, according to a report from the Federal Reserve Bank of Kansas City.
Those numbers appear to reflect a local housing market that got into risky subprime loans earlier than the rest of the country and thus may digest the problem loans sooner.
“If you look at our composition of subprime loans, they tended to have originated earlier,” said Mark Schweit zer, an economist overseeing the Fed’s Denver branch.
Subprime loans — higher-interest-rate loans made to borrowers with impaired credit scores — represented a larger share of mortgage originations locally than nationally in 2004 and 2005.
By 2006 and 2007, subprime originations were a smaller slice of the total in the metro area than nationally.
About 78 percent of subprime borrowers in the metro area went with an adjustable-rate mortgage, compared with 65 percent nationally. And more than 93 percent of those subprime ARM loans carried prepayment penalties that limit refinancing options, compared with 73 percent nationally.
Borrowers who took out fixed-rate subprime loans average a 7.4 percent interest rate. Those who turned to subprime ARMs started out at 7.3 percent and now average 8.8 percent.
The silver lining is that interest-rate resets this year will be easier to absorb than last, Schweitzer said.
Given current interest rates, sub prime loans in the metro area should reset to about 8.8 percent on average, compared with an 11.2 percent rate jump borrowers faced last year.
About 46 percent of subprime ARMs still faced a reset as of the end of 2007.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
