Foreclosures Once Again on the Rise

[Jul 2, 2007.]

The Mortgage Bankers Association is reporting that foreclosures on adjustable-rate mortgages made to individuals with troubled credit histories skyrocketed in the first quarter of 2007.

Late payments on mortgages also increased dramatically in the initial three months of the year, jumping to an astounding 15.75 percent. The figure represents the percentage of payments which were more than a month late on subprime adjustable-rate home mortgages.

It's been quite difficult for homeowners to keep up with monthly payments on subprime mortgages, given increasing interest rates and disappointing home prices. In fact, the crisis has been so severe that some lenders in the subprime industry have been forced to stop offering the loans.

Statistics show that the percentage of subprime adjustable-rate mortgages leading to foreclosure was the highest ever in the first quarter of 2007, reaching a record 3.23 percent. That's a sizeable jump from the 2.70 percent recorded in the last quarter of 2006.

The chair of the Federal Reserve, Ben Bernanke, expects more delinquencies and foreclosures in the months ahead, given the fact that interest rates on subprime adjustable-rate loans will be rising. About two million adjustable-rate mortgages are expected to be recalibrated for higher interest rates in 2007 and 2008.

Still, the Federal Reserve chairman does not expect the subprime mortgage crisis to adversely affect the broader economy. Problems within the subprime market are being blamed on lax standards for loan applications. In fact, Congress is considering possible action in the wake of the troubles. In the interim, the Fed is contemplating stricter rules to curb abuse and enhance disclosure.

Meanwhile, the percentage of all mortgages beginning the foreclosure procedure in the first three months of the year increased to 0.58. That's higher than the previous record of 0.54 percent in the last quarter of 2006. The Mortgage Bankers Association's survey involves close to 44 million loans across the U.S.

Julie Ann Amos
July 2nd 2007
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