A report by the Federal Reserve Bank of Richmond shows that despite pockets of foreclosures and delinquencies, Virginia mortgages overall are performing better than the national average. The report looks at the background, composition and performance of prime and subprime mortgage loans in Virginia. (Subprime mortgages loans are those made to people with credit scores at 620 or below.)
The Commonwealth ranks 41st among the nation’s 50 states with subprime mortgages accounting for 8.8 percent of loans compared to the national average of 11.7 percent, according to fourth quarter 2008 data. The number of Virginia subprime loans in foreclosure was 9.4 percent compared to the national average of 13.7 percent.
Still, the dire economic conditions that prevailed in 2008 and 2009 continue to create hardships for homeowners and communities nationwide. As a result, mortgage loan delinquencies and foreclosures are rising, explained Edward “Ned” Prescott, research economist and vice president. “It’s important to keep in mind that mortgage delinquencies continue to increase nationwide and Virginia is no exception,” he noted.
The Richmond Fed also looked at mortgage performance throughout the Commonwealth.
“There is a lot of variation in mortgage performance throughout the Commonwealth, but the outer ring of Northern Virginia is the worst shape and has been for some time,” Prescott said. The report ties the poor performance in Northern Virginia to the big increase and ensuing drop in house prices there. There also was a large fraction of interest-only loans taken out in Northern Virginia compared with the rest of the Commonwealth.
Read the full report.
The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.
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