Home loans in foreclosure edged up to a record level in the third quarter of 2002 as the weak economy forced a larger portion of mortgage holders out of their homes, a mortgage trade group said Tuesday.
But the group, the Mortgage Bankers Assn. of America, said a slowdown in late loan payments suggests foreclosures will decline as employment picks up in a recovering economy.
Loans in the process of foreclosure grew to 1.15% of mortgages, up from a revised level of 1.13% in the second quarter of last year, the group said. The previous high was 1.14% in 1999.
At the same time, loans entering the foreclosure process fell slightly in the quarter, to 0.37% from 0.38%. The number of loans that were delinquent -- at least 30 days overdue -- also fell, to a seasonally adjusted 4.66% from 4.77% the previous quarter.
Doug Duncan, chief economist for the mortgage bankers group, said the decline in late loans indicates an improving climate for mortgage holders. As the economy recovers, there should be a slowdown in delinquencies, followed by an easing of foreclosures, he said.
"We believe going forward there will be fewer households facing the harsh economic reality of unemployment that helped to drive up delinquencies and foreclosures in the first two quarters of 2002," Duncan said.
A smaller share of borrowers with a blemished credit history, known as sub-prime borrowers, lost their homes or were late with payments in the quarter, the mortgage bankers said. That probably was because unemployment was stabilizing in spite of the uneven recovery, Duncan said.