Bloomberg informs us that the FDIC has released data showing that mortgages over 90 days past rose over 36% from second quarter last year to second quarter this year, the biggest rise since 1991.
This report is troubling in two regards. First, the last big spike occurred in the 1991 recession, which was a nasty, though short, affair. We aren’t even in a recession. Mortgage delinquencies and defaults generally track unemployment, yet unemployment levels are not high by historical standards. What is going to happen if/when the economy slows? We are only in the early phases of a credit contraction.
Second, as was mentioned in passing in a Wall Street Journal story today and has been treated in greater depth elsewhere, many ARM mortgages had low initial interest rates and will reset, with the heaviest concentration in 2008.