Loan defaults continue rising

Defaults on U.S. sub-prime mortgages continued their relentless climb in December as some borrowers faced rising payments on adjustable loans, according to Wachovia Corp.

A team of analysts at Wachovia said 28.1% of loan balances backing 20 sub-prime bonds created in the first half of 2006 were in default, up 2.43 percentage points from the previous month. That increase compares with a jump of 2.25 percentage points in November.

“It is increasingly difficult to find new synonyms for the word ‘increase’ to describe the direction of nonperforming loans,” the analysts wrote in a report dated Friday.

Defaults are rising as declining U.S. real estate prices make it harder to sell homes or refinance.

About $200 billion of loans made to people with poor credit are scheduled to adjust to higher payments this year, according to the report.

The defaults cited by Wachovia include cases in which payments are at least 60 days late, the loan is in foreclosure, the borrower is in bankruptcy proceedings or the property has already been seized by the mortgage holder.