Foreclosure notices set record again
Homeowners struggling to deal with sharp increases in their adjustable-rate mortgage payments were hit with a record number of foreclosure notices in the spring as the crisis in sub-prime lending intensified.
The problem was the most severe in the industrial Midwest and former housing boom areas such as California and Florida, but economists warned that the situation would get worse in coming months as an estimated 2 million adjustable-rate mortgages with low introductory interest rates reset to much higher rates.
The crisis is most severe in sub-prime mortgages -- loans provided to borrowers with weak credit -- but it is now spreading to other types of mortgages, according to a quarterly report released Thursday by the Mortgage Bankers Assn.
That report showed that the number of homeowners who got foreclosure notices in the April-June quarter hit an all-time high of 0.65%, up from 0.58% in the first three months of the year.
It marked the third consecutive quarter that a record was set.
The association’s survey found that 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. It rose to 5.12% of all loans, the highest level in five years and up from 4.84% in the first quarter.
The delinquency rate for sub-prime loans increased more sharply, to 14.82%, up from 13.77% in the first quarter. That was the second-highest sub-prime delinquency rate on record after a 14.96% rate in spring 2002.
The delinquency rate for prime loans, offered to borrowers with good credit histories, also increased, but by a much smaller amount. It rose to 2.73%, up from 2.58% in the first quarter.
Doug Duncan, the association’s chief economist, said the worsening performance was the result of two major factors -- heavy job losses in the Midwest states of Ohio, Michigan and Indiana, a region hard hit by layoffs in the auto industry and other manufacturing industries, and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona.