Subprime mortgage woes push foreclosures to a record high
The number of American homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.
The Mortgage Bankers Association reported that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.
The delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring, rising to 5.12 percent of all loans, up nearly three-fourths of a percentage point from the same period a year ago.
Doug Duncan, the MBA's chief economist, said the worsening performance was driven by two factors - heavy job losses in the Midwest states of Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona.
The Midwest has been hit hard by a heavy loss of jobs in manufacturing, especially in autos and related industries.
"The percent of mortgages in Ohio that are 90 days or more past due or in foreclosure is still more than twice the national average and 1 percent of all the mortgages in Michigan had foreclosure actions started on them during the last quarter,'" Duncan said.
He said there were also significant problems in the neighboring states of Indiana, Illinois, Kentucky, Tennessee and Pennsylvania.
Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.
During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.
Now with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.
Another big problem is that an estimated 2 million adjustable rate mortgages are scheduled to reset this year at sharply higher interest rates, which will cause monthly payments in some cases to double or even triple, a problem that is especially severe in the market for subprime mortgages, loans offered to borrowers with weak credit histories.
Martin Crutsinger is a writer for the Associated Press.
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