Oil-rich states still dominate list of best places to lendmortgagepress.comlending demographics, non-prime mortgages, economic conditions
University Financial Associates' (UFA) "Best Places to
Lend" for Winter 2005 includes the oil-producing states of
Oklahoma, New Mexico, Louisiana, Texas, North Dakota, Alaska,
Mississippi and West Virginia. Six of these eight states are on the
top 10 list for highest oil production per capita by state.
Mississippi and West Virginia are the two states that are not in
the top 10 list for oil production. "Best" places have expected
loan values (profitability) for a "constant-quality" borrower that
are higher than in other states. That's a key finding of the latest
quarterly non-prime mortgage analysis produced by UFA. The
"Best Places to Lend" list holds borrower quality constant
and reflects only the variation in economic conditions among
states.
"Both borrowers and the underlying housing collateral in these
areas are situated more favorably to withstand the consequences of
an uncertain economy," said Dr. Dennis Capozza, professor of
finance at the University of Michigan Business School and a
principal of UFA. "Expected defaults in the best places can be as
little as half the level of some of the less promising states.
Losses can vary even more, since recoveries are also enhanced when
economic conditions are favorable for lenders."
Each quarter, UFA evaluates economic conditions in the United
States and assesses how these conditions will impact expected
future defaults, prepayments, loss recoveries and loan values for
non-prime loans. A number of factors affect the expected defaults
on a constant-quality loan. Most important are worsening economic
conditions. A recession causes an erosion of both borrower and
collateral performance. Borrowers are more likely to be subjected
to a financial shock such as unemployment, and if shocked, will be
less able to withstand it. Federal easing of interest rates has the
opposite effect.
For more information, visit www.universityfinancial.com.
