Real estate investors defaulting on second mortgages have contributed significantly to the mortgage delinquency rates in states like Nevada, California, Arizona, and Florida, according to a new report from the Mortgage Bankers Association (MBA).
The homes in question are characterized as residences where the owner is not living on-site. The MBA says, “As of June 30, 32-percent of prime mortgage defaults in Nevada were on non-owner occupied properties, along with 24-percent of subprime loans. In Florida, the non-owner occupied shares were 25-percent for prime loans and 14-percent for subprime loans. Nevada and Florida are facing the fastest increases in delinquent loans in the country.”

Meanwhile, in Arizona, 26-percent of prime loan defaults were related to non-owner occupied homes; and in the subprime sector, 18-percent of defaults were classified in the same category. California also experienced this phenomenon with 21-percent of prime defaults being characterized as non-owner occupied residences and 15-percent of subprime loans falling into the same category.
“Defaults are on the rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home but is often the case of an investor gambling on a continued increase in home values and losing that gamble,” said Doug Duncan, MBA chief economist and senior vice president of research and business development.” He added, “California, Nevada, Arizona, and Florida were among the states with the fastest home price appreciation over the last five years. This rapid price appreciation attracted both speculators and home builders, a volatile combination that lead to an over-supply of homes that was beyond the capacity of the local populations to support. When this over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages.”