Townsend Appraisal Commentary

The percentage of distressed first-lien subprime loans among residential borrowers in the states that make up the sixth district of the Federal Reserve fell in the third quarter from a year earlier, according to the Federal Reserve Bank of Atlanta.

The district consists of Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee.

The percentage of loans that were distressed for 90 days or more had the largest drop.

Georgia experienced the steepest annual decline in distressed first-lien subprime loans, falling 18 points from 54% to 36%. The state was followed by Tennessee, Florida and Alabama. Louisiana and Mississippi tied for last with a 5-point decline.

Georgia has benefited from the more than $339 million distributed through the Hardest Hit Fund to help the area deal with mortgage defaults and other issues stemming from financial problems facing homeowners. Seven jurisdictions in Georgia received a total of $91.2 million from the Neighborhood Stabilization Fund, while the state received another $97 million to help the state stabilize foreclosure–riddled areas.

But while the latest Housing Scorecard from the Obama administration says government home preservation programs have saved more than 135,000 Atlanta families from foreclosure, the city is still facing a high percentage of distressed home loans, REOs with record low prices and severely underwater mortgages. The scorecard states that the share of distressed mortgages in and around Atlanta that are either delinquent, in foreclosure or bank-owned is above the national average and has been so since mid-2000.

Florida saw the third steepest decline, according to the Atlanta Fed's report, but remains the state with the highest rate of distressed first-lien subprime loans in the district. At the end of the third quarter, 53% of said loans were distressed, down 11 points from a year earlier.

The percentage of distressed first-lien prime loans in each state in the sixth district remained constant, except for Georgia and Florida. Both states had slight declines.

The information in the Atlanta Fed's report is based on data provided by Lender Processing Services (LPS: 19.15 -0.88%) and covers approximately 82% of the active residential mortgages in the  district, including agency, nonagency and portfolio products.

Write to Justin T. Hilley.