A Day Late and a Dollar Short

With the impending reset of option-ARMs threatening to dwarf the subprime crisis, Wachovia has implemented a new policy "quizzing" the mortgage applicant on the particularly insidious qualities of the mortgage. Unfortunately, this policy may not be enough to placate federal regulators, especially with most underwriters no longer offering the product.

Wachovia's new policy ``is far too little and far too late and indicative of how bad it is,'' said William Purdy, a Soquel, California, lawyer who concentrates on home refinancing. ``These loans are ticking time bombs and probably the worst thing the bank can say it has ever done to its customers.''

Unfortunately, Wachovia is already on the hook for $1.7 billion this year and $2.8 billion in 2009.

More Bad News in Housing

I'm starting to sound like a broken record. At this point, I'd happy if mortgage troubles just remained steady, but since last summer, every quarter has gotten worse. According the Mortgage Bankers Association, first quarter highlights include:

• Delinquencies are 6.35% of outstanding mortgages, up from 5.82% Q4 (2007), and up from 1.51% Q1 (2007).
• Foreclosures are 2.47% of outstanding mortgages, up from 2.04% Q4 (2007), and up from 1.28% Q1(2007).

And it looks like the problem is moving into prime borrowers as well, consisting of 40% of foreclosures. Another ominous sign is that 7% of the foreclosures were FHA mortgages, which are guaranteed by the federal government.