Among mortgage types, the new-foreclosure rate worsened the most for prime fixed-rate loans in the second quarter, indicating that unemployment has replaced product category as the biggest driver of defaults, the Mortgage Bankers Association said Thursday.
The foreclosure start rate rose 33 basis points from a year earlier and 6 basis points from the first quarter to 0.67%, the trade group said. By contrast, for subprime adjustable-rate mortgages, the figure fell 52 basis points from the second quarter and 13 basis points from a year earlier, to 4.13%.
In another dismal quarterly report, the MBA said the percentage of all loans that were in foreclosure or at least one payment past due soared to 13.16% in the period, the highest since the survey began in 1979.
The share of loans at least 90 days past due rose 12 basis points from the first quarter and 283 points from a year earlier, to 9.24%.
The percentage of loans in the foreclosure process at the end of the second quarter was 4.3%, up 45 basis points from the first quarter and 155 points from a year earlier.
Jay Brinkmann, the MBA's chief economist and senior vice president, said he was "a little surprised" that prime fixed-rate loans now account for one in three foreclosures, compared with one in five a year ago.
"It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves," he said. "It's certainly a problem with employment, but it's also a function of how far home prices have fallen."
Four states — Arizona, California, Florida and Nevada — continue to have a disproportionately high share of foreclosure starts at 44% of the all new foreclosures in the second quarter.
Federal Housing Administration-insured loans, a category that had been a bright spot in past surveys, are showing signs of trouble, with record increases in foreclosures started, the percentage of loans in foreclosure and loans 90 days or more past due.
The percentage of FHA loans in the foreclosure process rose 22 basis points from the first quarter and 74 points from a year earlier to 2.98%.
A state-by-state breakdown shows that Florida remained a standout for the worst mortgage performance, with 12% of all mortgages in the second quarter somewhere in the process of foreclosure and another 5% that were 90 days or more past due at the end of June.
But other states are showing signs of weakness.
After being spared somewhat from problems, both Maryland and Washington stood out for having high foreclosure start rates in the second quarter, with Maryland at 1.31% and Washington at 1.09% because of increased defaults in pay-option adjustable-rate mortgages, Brinkmann said.
He cautioned that the problems are far greater in states that had the biggest price increases during the housing boom. "We're seeing that in those states that now have huge price declines, when a loan goes delinquent, it's almost going straight to foreclosure," he said.
Brinkmann said he expected foreclosures to peak at the end of 2010, or roughly six months after unemployment.
He also emphasized that only seven states had foreclosure start rates higher than the national average of 1.36% in the second quarter. "It's a big country and we have multiple bottoms, with some markets recovering faster than others, so it's problematic to look only at the national numbers."