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The percentage of residential mortgages in foreclosure or with at least one payment past due reached 13.2% in the second quarter ended June 30, the highest percentage ever recorded by the Mortgage Bankers Association.
Jay Brinkmann, the industry group's chief economist, said during a conference call last week that he expects the percentage of borrowers behind on their mortgages will climb through the middle of next year. Foreclosures likely will peak six months later, at the end of 2010, according to MBA estimates.
Until the U.S. employment situation improves, it is unlikely there will be meaningful reductions in the foreclosure and delinquency rates, he said. And until prices recover in areas with steep home price declines, borrowers who owe more on their mortgage than their home is now worth will continue to be in danger of foreclosure.
The delinquency rate for mortgages on one- to four-unit properties rose to a seasonally adjusted 9.2% of all mortgage loans outstanding in the second quarter, up from 9.1% in the first quarter and 6.4% in the second quarter of 2008, according to the MBA's national delinquency survey. The delinquency rate does not include mortgages in the foreclosure process.
Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.8% in the first quarter and 2.7% in the second quarter of 2008, the MBA reported. However, mortgages entering the foreclosure process during the second quarter actually fell slightly to 1.36% of all loans, down from 1.37% in the first quarter. Foreclosure starts were still up from 1.1% in the second quarter of 2008.
"While the rate of new foreclosures started was essentially unchanged from last quarter's record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase," said Brinkmann, in a news release.
The survey covers 45 million loans on one- to four-unit residential properties, representing between 80% and 85% of all first-lien residential mortgage loans outstanding in the United States. Records date back to 1972.
"As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five," said Brinkmann.
