Increase in Prime Loans on Bank Foreclosure List

The pace at which prime loan borrowers are going into Bank Foreclosure List is accelerating, particularly in states where unemployment rate is mounting and property values are dropping like hot potatoes.

It used to be when the foreclosure crisis is driven by subprime loan defaults which resulted to the collapse of the housing market, with recovery still in question. The recent trend of prime loan properties going on Bank Foreclosure List has proven once more just how expansive the effects of the foreclosure crisis.

The growing number of prime loan borrowers facing foreclosures is causing tremendous alarm in the market because people involved are those with usually unblemished credit scores. The effect is a precipitous drop in property values in affluent neighborhoods across the country.

Brian Bethune of the IHS Global Insight said that joblessness is a major factor in the worsening foreclosure crisis, adding that it will derail whatever progress was made to revive the housing market.

Clear Capital President Kevin Marshall claimed that from the start of the foreclosure crisis, higher-end properties appeared to be immune on its effects. Now, there is a growing number of higher-end properties on Bank Foreclosure List.

In the first three months of 2009, Mortgage Bankers Association (MBA) said that fixed-rate, prime loans accounted for nearly 50 percent of the increase in foreclosure filings.

Data from the Office of Thrift Supervision and Office of the Comptroller of the Currency showed that delinquent prime loans in the fourth quarter of 2008 reached 2.4 percent, a significant increase from the 1.1 percent recorded in the first quarter of 2008.

Meanwhile, MBA data showed that states with high foreclosure rates, including Arizona, California, Florida and Nevada accounted for 56 percent of the rise in foreclosure starts. These states also took 50 percent of the share on the increase in fixed-rate, prime loans facing the danger of foreclosure.

Data from RealtyTrac, a foreclosure monitoring firm, showed that foreclosure filings across the country in April increased 1 percent compared with March numbers, with 1 in every 374 homeowners receiving notices of default and auction.

Additionally, these states also have the highest joblessness rates in April, with California posting 11 percent and Nevada 10.6 percent unemployment rate.

Economists fear that the unabated increase in unemployment could further exacerbate the delinquency problem on fixed-rate, prime loans that may lead to more properties being placed on Bank Foreclosure List.

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