Fitch to be Tied

The aptly named Roelof Slump has spoken [everywhere, but here quoted in the Wall Street Journal].

“The cure rates have really collapsed,” said Roelof Slump, a managing director at Fitch.

Cure rates, which ran at 45% for prime loans as a rule, are coming in at 6%. Unless that changes, there’s big trouble ahead on the more than three-quarters of home mortgage loans that are prime.

Still, while one might have hoped this would not be the case, it can not come as a surpise that underwater loans and lost jobs would spread delinquincies and foreclosures into the prime market.

The riskĀ has beenĀ calculable. What can’t be predicted is whether policy and, perhaps a market sentiment shift, will stem the tide before it peaks to worst-case scenario levels in 2010.

The less our admired analyst Bill at Calculated Risk comments subjectively, the more one surmises that he believes the scary numbers speak for themselves.

Still, we believe this psychological indicator–underwater mortgage holders failing to cure–may improve with a kick at the first sign that demand and access to credit normalizes after volume in transactions stays strong for a bit.

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