Foreclosures on the Rise

[Sep 29, 2007.]

Foreclosures reached a record amount in the spring—the result of the collapse of the subprime mortgage market.

According to the Mortgage Bankers Association, borrowers forced into foreclosure from April to June hit 0.65%. That's the third quarter in a row of record highs.

Meanwhile, the delinquency rate was also up. The rate refers to the percentage of homeowners who have fallen behind on their mortgage payments but have not fallen into foreclosure yet. The delinquency rate stands at 5.12% of all loans. That's an increase of nearly ¾ of a percentage point compared to the rate one year ago.

The delinquencies and foreclosures are apparently most pronounced in the Midwest, in states such as Ohio, Michigan, and Indiana. The West and parts of the South have also been hard-hit. Job losses, particularly in the auto industry and other manufacturing sectors, appear to be taking their toll.

For instance, the percentage of Ohio mortgages that are 90 days past due or in foreclosure is more than two times the national average. Other states, such as Illinois, Kentucky, and Pennsylvania are also experiencing major problems as far as the housing market is concerned.

The defaults are exacerbated by the fact that home sales are declining, the number of unsold homes is rising, and prices are sluggish. Such a situation is a recipe for default.

In addition, many homeowners with adjustable rate mortgages are smarting from the fact that their rates are on the rise. In fact, as many as 2 million adjustable rate mortgages will be reset this year at significantly higher interest rates. In some cases, homeowners may see their mortgage payments triple.

The housing market is not expected to rebound until the middle of next year. As a result, many homeowners are now in imminent danger of losing their homes. In an effort to stem the tide, the President has unveiled a plan to help the beleaguered housing market, but some Congressional opponents are calling it too little, too late.

Julie Ann Amos
September 29th 2007

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