Posted on 09/06/2007 8:28:05 AM PDT by Moonman62
Subprime Mortgage Woes Push New Foreclosures to a Record High
WASHINGTON (AP) -- The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.
The Mortgage Bankers Association reported Thursday 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.
The delinquency rate for subprime loans increased sharply to 14.82 percent -- up from 13.77 percent -- in the first quarter.
The delinquency rate for prime loans, offered to borrowers with good credit histories, also increased but by a much smaller amount, rising to 2.73 percent, up 2.58 percent in the first quarter.
Democrats have blamed predatory lending practices for a large part of the current problems and have introduced a number of bills aimed at helping homeowners stay in their houses.
Federal and banking regulators issued guidance this week encouraging lending institutions to work with borrowers to restructure loans at more favorable terms rather than foreclosing on the existing mortgages.
Last week, President Bush announced changes in the Federal Home Administration insured-loan program to help combat the expected wave of foreclosures and also answer attacks from Democrats that his administration has been slow to respond to a growing crisis in mortgage foreclosures.
Mortgage Bankers Association: http://www.mortgagebankers.org
The government promotes irresponsibility. It should NOT be up to the government to pay your mortgage. GEESH!
5.12 percent of all loans. That’s one out of twenty.
Don’t be tellin me this is just a “subprime” problem and the “market is so small it can’t have an effect”
What happens if it goes to one out of five?
ping
If you're going to hype it, hype it with the facts: Delinquencies are up almost .75 points since last year.
Good, then tell the Federal Reserve to stop trying to slam the economy with interest rates.
So--This "subprime crisis" is smoke'n'mirrors for the dims to stifle free enterprise??
IT'S THE ECONOMY, STUPID RING ANY BELLS!??
It was Bernanke and Paulson who kept repeating that.
What about the houses that builders have given to the banks? These don’t show up as mortgage defaults.
Yeah, it's got NOTHING to do with people buying more house than they can afford.
Typical class warfare pap from the Jackass party. I blame people not paying their bills.
I bought more house than I could afford 20 years ago. I still own it and it’s the best investment I ever made.
The foreclosures in the sub-prime mortgage market are not the real problem here. They are a very small portion of the housing market.
The bigger issue is foreclosures of homes that were constructed, purchased and financed purely on speculation -- by people with good credit records who never had any intention of living in them. THIS is what is ultimately going to drive the housing market to collapse. There are simply too many homes out there and not enough buyers.
I had a long conversation with a real estate broker recently. He said that this problem began with the politically motivated push to entitle all Americans to own their own homes, whether they could afford them or not. A prescription for disaster. Predictable.
Where I am people who can’t sell, and that’s everybody, are renting their places out. Rents are still sky high.
Huh how is the fed trying to slam the economy with interest rates?
Speculators are to blame, they created a false demand and drove up prices. Our builder had to put in a clause that you had to live in the house for 6 months.
That’s partially the reason. There are many factors. Plus, the real estate boom occurred in many countries besides here.
One thing to consider is that California has 12% of the US population and housing here is colapsing hard and hasn’t really started yet.
For the most part the large % of the housing market, prices are already 20% lower thsn their highs and falling.
When our economy colapses it’s such sa large % of the total that it’s going to affect the entire country even if your housing market isn’t colapsing.
I live in a very nice town in the NYC area, and there was a small townhouse development built next door to me last year. The units pre-sold for somewhere around $650,000 apiece back in 2004, and they were listed for $850,000+ when they were completed last year. Not a single one of them has been sold, and the prices have been reduced to around $725,000 in the last few months.
If they're still on the market in January, I'm going to put in a bid of $250,000 on one of them -- just to see what happens.
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