Delinquency in Home Loans Jumps Sharply : Mortgages: News comes on top of report that cites Citicorp’s real estate unit for being sloppy and overly aggressive.
Lenders, plagued by troubled commercial real estate loans over the last three years, are facing an accelerated problem as more homeowners are having trouble keeping up with their payments.
The Mortgage Bankers Assn. released figures Thursday showing that the percentage of homeowners behind on their mortgages took a sharp jump in the second quarter after falling for three previous quarters. The news comes on top of disclosures of severe troubles in the mortgage operation of Citicorp, the nation’s largest lender.
Mortgage delinquency rates rose to 4.77% from 4.52%, the trade group said. It also said that in California the most serious numbers--those showing loans that are at least 90 days past due and foreclosure inventory--worsened considerably.
Experts noted delinquencies in California might have been even higher if it had it not been for the financial relief homeowners have enjoyed as a result of the refinancing binge and lower adjustable-rate loan payments.
Nevertheless, loans past due 90 days or more in California rose to 0.56%, from 0.41% the previous quarter.
Peter Treadway, an analyst with Smith Barney, Harris Upham & Co. in New York, said that in California delinquencies and foreclosures are more worrisome because lenders, unlike in the past, are losing money when selling foreclosed property.
“The lenders used to brag that they never lost money on a foreclosed house in California. That’s not true anymore,” he said.
Although news that Citicorp’s mortgage unit remains deeply troubled by delinquencies shows how the growing financial troubles of consumers are hurting lenders everywhere, it reflects more the legacy of an operation long criticized as sloppy and overly aggressive, lenders and analysts said.
“You can’t treat mortgage banking as a side business as Citicorp has. You have to put in leadership, proper systems, proper controls and put adequate human and intellectual resources into the business,” said Angelo R. Mozilo, chief executive of Pasadena-based Countrywide Funding Corp. and president of the Mortgage Bankers Assn. of America trade group.
Problems for the New York banking giant’s mortgage business were highlighted Thursday when parts of a leaked regulatory report were published in the New York Times and Wall Street Journal. The report was sharply critical of the bank’s St. Louis-based mortgage processing subsidiary and related mortgage banking operations.
The confidential report from the Office of the Comptroller of the Currency portrayed the operation as full of delinquent loans with poor documentation. It also suggested that the management in the nation’s biggest bank has been lax for failing to clean up the operation quickly. Another concern raised was that Citicorp is especially vulnerable in California, where it aggressively went after mortgage business in the 1980s.
In a statement, Citicorp suggested that the leak of the Aug. 18 report was illegal. Citicorp called the report “already outdated” and said it may contain information that is inaccurate and lacking proper context.
“The U.S. mortgage problems are not new to our management; they have been identified and disclosed, and are being addressed,” the bank said. Citicorp shares Thursday fell 50 cents to $16.50 in trading on the New York Stock Exchange.
Citicorp’s mortgage problems follow an aggressive nationwide push in the 1980s that at times amazed skeptical competitors.
“When someone does significantly more volume, you ask yourself, ‘Do they have a secret?’ We were all asking how you could do that kind of volume and still make quality loans. We’ve found out now that you can’t do that,” said Herbert Sandler, chairman of Golden West Financial, whose World Savings & Loans is one the nation’s largest and most conservative home lenders.
Behind in Their Mortgage Payments
Here are the 10 states with the highest mortgage delinquency rates for April through June. Figures represent the percentage of mortgage holders 30 days or more behind in their payments.
Delinquency Rank State Rate* 1. Mississippi 7.15 2. Tennessee 7.06 3. Georgia 6.21 4. South Carolina 5.87 5. Texas 5.50 6. Alabama 5.49 7. Louisiana 5.34 8. North Carolina 5.24 9. Pennsylvania 5.13 10. Indiana 4.95 34. California 3.54 United States 4.77
* U.S. figures are seasonally adjusted; state figures are not.
Source: Mortgage Bankers Assn. of America
