Nonprime Mortgages: Data on Loan Performance by Cohort Year, Product Type, and Location (GAO-10-806SP, August 24, 2010), an E-supplement to GAO-10-805

Background

This e-supplement provides information on the performance of nonprime loans (including subprime and Alt-A loans) originated from 2000 through 2007. After increasing dramatically from 2000 through 2006, the nonprime market contracted sharply in mid-2007, partly in response to increasing default and foreclosure rates for these mortgages. The subprime segment of the nonprime market generally serves borrowers with blemished or limited credit histories, while the Alt-A market segment serves borrowers whose credit histories are close to prime, but the loans have one or more high-risk features. This e-supplement provides information on (1) the number and percentage of nonprime, subprime, and Alt-A loans in different performance categories by cohort year at the end of each quarter from December 31, 2008, through December 31, 2009; (2) the number and percentage of nonprime loans in different performance categories by product type and cohort year as of December 31, 2009; (3) the number and percentage of nonprime loans in different performance categories by Census division and state as of December 31, 2009; (4) the estimated number and percentage of seriously delinquent nonprime loans by congressional district as of September 30, 2009, and December 31, 2009; and (5) the number and percentage of nonprime loans in the 2004 through 2007 cohorts in different performance categories at the applicable year-ends from 2004 through 2009.

To analyze nonprime loan performance through the end of 2009, we used data from CoreLogic LoanPerformance's Asset-Backed Securities Database, which contains loan-level data on a large majority of nonagency securitized mortgages in subprime and Alt-A pools. We focused our analysis on first-lien purchase and refinance mortgages for one-to-four-family residential units. The loan performance categories that we used in our analysis were as follows: prepaid, current (up to date on payments), delinquent (30 to 89 days behind), in default (90 or more days behind), in the foreclosure process, or having completed the foreclosure process. We considered a loan to have completed the foreclosure process if it was in the real-estate-owned status as of a particular date, or was paid off after being either 90 or more days delinquent, in the foreclosure process, or in real-estate-owned status. We classified mortgages in default or in the foreclosure process as "seriously delinquent." For a more detailed discussion of the CoreLogic LoanPerformance database and our methodology, see GAO, Nonprime Mortgages: Analysis of Loan Performance, Factors Associated with Defaults, and Data Sources, GAO-10-805 (Washington, D.C.: August 24, 2010).

We conducted this engagement in Washington, D.C., and Chicago, Illinois, from December 2009 through August 2010 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

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