Delinquencies: Making Lemonade From Lemons.(Editorial)

I love documents - 10Ks, 10Qs, S-1s, S-2s, take your pick. Documents filed with the Securities and Exchange Commission don't lie. Actually, that's not necessarily true.

Let's back up a minute. Documents aren't supposed to lie. Then again, professionals that write the documents, might, on occasion, flub a significant fact or two, or three or 300. Hence, the investment community winds up with companies like Enron, MCI, Homestore.com, take your pick.

In a recent 10-K filed by Household International, the residential subprime giant that was recently bought by HSBC, the company revealed that its "two-month-and-over" delinquency ratio had increased to 3.91%.

That might not seem like a huge deal, but compare that ratio to the same ratio a year earlier, 2.63%, and that translates into a 48.6% jump in delinquencies over a 12-month period. Like I said, I love documents. They don't lie.

Any reporter who has covered Household knows that getting information from the company in regard to what it's up to is a bit like cracking the Kremlin. Maybe that will change under Sir John Bond's HSBC. Time will tell.

But the Household delinquency number is interesting. (See related story in this issue.) It shows that things are not quite right at Household in regard to its mortgage servicing portfolio. The reason, according to the SEC filing, is simple: "continued softness in the economy, including higher unemployment ." (A company spokesman confirmed this.)

Now the question begs: if Household, the nation's third largest residential subprime servicer, is experiencing a spike (the 48.6% number) in delinquencies, is anyone else? Among subprime servicers, the answer is yes, at least that's according to delinquency figures that appear in the Quarterly Data Report, a statistical product published by Thomson Media, the same company that owns this newspaper. ...