Loans in foreclosure have doubled over the past year, while delinquency rates continue to soar.
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By Les Christie, CNNMoney.com staff writer
Last Updated: September 5, 2008: 10:07 AM EDT
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NEW YORK (CNNMoney.com) — A record 1.249 million homes were in foreclosure during the second quarter of 2008, according to a report released Friday by the Mortgage Bankers Association.
And new foreclosure proceedings were started on about 490,000 of the 45 million home mortgages serviced by MBA members. That’s up 9% from the 448,000 starts recorded in the previous quarter.
Mortgage delinquencies continued their grim rise during the three months ended June 30, with 2.9 million homeowners falling behind on their loan payments, apart from those already in foreclosure. Compared with a year ago, delinquencies are up more than 25%, while loans in foreclosure have nearly doubled. Both levels were the highest ever recorded by the survey.
“The national foreclosure numbers continue to be driven by the hardest hit states continuing to get much worse,” said Jay Brinkmann, MBA’s Chief Economist. “The increases in foreclosures in California and Florida overwhelmed improvements in states like Texas, Massachusetts and Maryland.”
California and Florida accounted for 39% of all foreclosures started during the quarter. Those two states as well as six others – Nevada, Arizona, Michigan, Rhode Island, Indiana, and Ohio – all had foreclosure start rates higher than the national average.
Subprime still sinking
Once again, subprime adjustable rate mortgages (ARMs) weighed heavily on the down side. Subprime ARMs, which represent only 6% of all loans outstanding, accounted for 36% of all foreclosures started during the quarter. In other words, 6.63% of all subprime ARMs went into foreclosure during the period – nearly 20 times the rate for fixed rate prime mortgages.
“Even if subprime stabilizes,” said Mike Larson, a real estate analyst with Weiss Research, “I would anticipate that prime loans would start to play catch-up. We’re not just confronting a credit crisis any more, we’re dealing with broad economic problems that are contributing to delinquency rates.”
On the bright side, Larson says the deterioration in home prices has slowed in the last couple of months, which could help delinquencies level off as well.
“They’ll continue to worsen,” he said, “but not at the pace of the last year.”
Nevertheless, Jay Brinkmann warned that it would be fruitless to try an call a bottom in this market any time soon.
“Real estate markets are local and some markets are already improving,” he said in a statement. “For example, even Michigan, one of the worst hit markets in the country, has now gone three quarters with little to no increase in its rate of foreclosures. Likewise, Massachusetts showed a very large drop in foreclosure starts, perhaps signaling a bottom.”
“Because of the sheer size of California and Florida, an improvement in the national numbers, whether delinquencies, home prices or any other measure, is unlikely until we see some turnaround in those two states.” To top of page
First Published: September 5, 2008: 9:59 AM EDT
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