NC Mortgage Trends Matthew Martin, Ph.D. Regional Economist Federal Reserve Bank of Richmond

NC Mortgage Trends Matthew Martin, Ph.D. Regional Economist Federal Reserve Bank of Richmond

The National Picture: 2007 Foreclosures Source: Realtytrac Confidential Information 2

The National Picture: Delinquencies Percent, NSA 25 National Mortgage Delinquency Rates Seriously Delinquent Mortgages Percent, NSA 25 20 Subprime Fixed Rate Mortgage Subprime Adjustable Rate Mortgage Prime Fixed Rate Mortgage Prime Adjustable Rate Mortgage 20 15 15 10 10 5 5 0 0 1998:Q1 2000:Q1 2002:Q1 2004:Q1 2006:Q1 2008:Q1 Source: Mortgage Bankers Association/Haver Analytics Note: Serious delinquencies are loans 90+ days past due plus those in the process of foreclosure. Confidential Information 3

The National Picture: 2/28 Default Rates Source: Federal Reserve Board calculations using Loan Performance data Confidential Information 4

The National Picture: Cumulative Defaults Cumulative Default Rates by Vintage 0.18 0.16 0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2007 2006 2005 2001 2004 2002 2003 10 20 30 40 50 60 70 Time in months Source: Federal Reserve Board calculations using Loan Performance data Confidential Information 5

Factor #1: Underwriting Percent Full Documentation ABS 2_28 Combined LTV ABS 2_28 100 90 80 60 40 85 80 20 75 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 70 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note: Fixed rate subprimes had better underwriting. (Not shown.) Important because it means that ARMs not inherently riskier. Source: Federal Reserve Board calculations using Loan Performance data Confidential Information 6

Factor #2: House Prices 25 Year-to-year percent change, NSA Year-to-year percent change, NSA 25 20 OFHEO purchase-only S&P/Case-Shiller National S&P/Case-Shiller 10-city 20 15 15 10 10 5 5 0 0-5 -5-10 -10-15 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: S&P/Case-Shiller, OFHEO, Haver Analytics -15 Confidential Information 7

Fifth District Subprime Summary Washington, DC Maryland North Carolina South Carolina Virginia West Virginia National % of Owner Occupied Houses that have Subprime loans 6.09 6.08 3.34 3.75 4.08 1.72 5.59 % in Foreclosure or REO 10.67 8.55 7.43 11.08 8.72 7.43 13.07 Confidential Information 8

North Carolina Delinquencies Confidential Information 9

North Carolina Foreclosures Confidential Information 10

North Carolina Foreclosures Confidential Information 11

Subprime Mortgages by MSA Confidential Information 12

North Carolina: Number of Subprime Mortgages Confidential Information 13

North Carolina: Percentage of Owner-Occupied Homes with Subprime Mortgages Confidential Information 14

North Carolina: % of Owner-Occupied Homes with Subprime Mortgages 90+ days Delinquent Confidential Information 15

North Carolina: % of Owner-Occupied Homes with Subprime Mortgages in Foreclosure or REO Confidential Information 16

North Carolina House Price Growth Confidential Information 17

North Carolina House Price Growth Confidential Information 18

North Carolina: Residential Permits U.S. North Carolina North Carolina 60.0 40.0 YoY % Chg 20.0 0.0-20.0-40.0 2002 2003 2004 2005 2006 2007 2008 Confidential Information 19

Confidential Information 20

Confidential Information 21

Confidential Information 22

Confidential Information 23

Charlotte House Price Growth Confidential Information 24

Charlotte House Price Growth 20.0 U.S. Charlotte, NC Charlotte, NC YoY % Chg 15.0 10.0 5.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Confidential Information 25

Charlotte Residential Permits YoY % Chg U.S. Charlotte, NC Charlotte, NC 40.0 30.0 20.0 10.0 0.0-10.0-20.0-30.0-40.0-50.0-60.0-70.0 2002 2003 2004 2005 2006 2007 2008 Confidential Information 26

North Carolina Payroll Employment Growth U.S. North Carolina North Carolina 5.0 4.0 YoY % Chg 3.0 2.0 1.0 0.0-1.0-2.0-3.0 2002 2003 2004 2005 2006 2007 2008 Confidential Information 27

North Carolina Unemployment Rate U.S. North Carolina North Carolina 8.0 7.0 Percent 6.0 5.0 4.0 3.0 2.0 2002 2003 2004 2005 2006 2007 2008 Confidential Information 28

Addendum: Alt-A Trends

Fifth District Alt-A Summary Washington, DC Maryland % of Owner Occupied Houses that have Alt-A loans 5.50 3.07 % in Foreclosure or REO 2.32 2.83 North Carolina 0.95 1.75 South Carolina Virginia West Virginia National 0.97 2.45 0.33 2.37 2.82 4.84 2.62 4.20 Confidential Information 30

Alt-A Mortgages by MSA Confidential Information 31

North Carolina: Number of Alt-A Mortgages Confidential Information 32

North Carolina: % of Alt-A Mortgages That Are Non-Owner Occupied Confidential Information 33

North Carolina: Percentage of Owner-Occupied Homes with Alt-A Mortgages Confidential Information 34

North Carolina: % of Owner-Occupied Homes with Alt-A Mortgages 90+ days Delinquent Confidential Information 35

North Carolina: % of Owner-Occupied Homes with Alt-A Mortgages in Foreclosure or REO Confidential Information 36