Even though most of the subprime distress has worked itself through the market, the pressure on the low-end continues because it is the low-end borrowers now who have the toughest entry to the oh-so-tight mortgage market. As the report reminds, proposed risk retention rules will likely mean a 20 percent down payment, which will price many borrowers out of the low end of the market.
And this is not just in the markets we always talk about. The New York Fed put out some alarming numbers today showing that 10 percent of mortgages in New York City are in the "seriously delinquent" pool, as in more than 90 days past due (for Manhattan it's one in 50 loans, but for the Bronx and Brooklyn it's one in eight). Since New York is a judicial foreclosure state (requires foreclosure cases go before a judge), the backlog of foreclosure cases hit 80,000 after the so-called "robo-signing" paperwork scandal. Properties repossessed by banks in March spent an average 900 days in the foreclosure process! The shadow inventory in New York is therefore huge, and that gets me back to where I started.