Let’s first understand what a loss severity rate is. Loss severity rate is the difference between the outstanding amount on the mortgage loan and the net amount realized. For example, Mr. A owes the bank $100,000. Unpaid interest, legal cost or any other fee is $15,000. So, the bank is owed $115,000. The property is then sold for $75,000. So, the bank realizes a loss of $35,000 and the loss severity rate is almost 30% ($35,000 ÷ $115,000).
Currently the loss severity rates are around at 44% on prime mortgage loans. It is predicted by Fitch Ratings that these rates might increase between 5% and 10%. So we can say that the loss severity rate might be around 49% to 54% on prime mortgage loans during 2011. The loss severity rates on Alt-A (Alternative A-paper) are around at 59%. We can say that the loss severity rate might be around 69% to 74% in 2011. On subprime loans, the loss severity rate is around 75% and it can reach 80% to 85%.
Now the housing market is going to face challenges in 2011 because of tax break expiration, increased mortgage rates and less modification numbers.
There’s pressure on banks that they modify more loans in the coming times. Moreover, banks are facing problems in foreclosure processes. These factors can bring the recoverable principal amounts down that a bank can get from a foreclosure. Distressed homeowners are delinquent on their mortgage payment for an average of 19 months. Fitch Ratings predicts that this duration can even worsen to 25 months in 2011 resulting in an increase in costs for banks.
It is expected that the lenders and mortgage servicers are going to find new and alternative ways and they are likely to prefer short sales in 2011 on foreclosures because on an average recovery rates on short sales are 10% higher.
If you want any help in a
Short sales in citrus Heights, you can seek help and education from me which is necessary to make educated decisions. If you would like a free PRIVATE consultation contact us:
Pearl Ahlquist
7921 Kingswood Dr. A6
Citrus Heights CA 95610
http:www.loanrecourse.com
McKayland Realty
916-708-3851
01149313