One in Eight Homeowners Delayed or in Foreclosed Housing

One in eight homeowners across the nation was behind in mortgage payments or already in foreclosed housing in the first quarter, according to a report released by the Mortgage Bankers Association this week. MBA cited unemployment as the main factor.

In April, nationwide unemployment has reached its highest level in more than 25 years and is still moving up, leaving homeowners with nothing to pay their mortgage loans and forcing families out of foreclosed housing.

Unemployment also increased the rate of foreclosures on prime mortgages, taken out by borrowers who had good credit scores. In the first quarter, foreclosures on prime mortgages accounted for the biggest share of new foreclosure filings.

Jay Brinkmann, chief economist of MBA, said it is difficult for the housing market to recover because of the employment situation. As mortgage payments depend on employment, the bottoming out of defaults or foreclosed housing seems to be still far away.

The rate of delinquent home loans rose despite federal, state and industry foreclosure moratoriums and efforts by the Obama administration to lower mortgage rates.

In March, rates on fixed-rate 30-year loans averaged 5 percent, down from the February average of 5.13 percent and the January average of 5.05 percent.

During the first quarter, a record high of 12.07 of mortgage loans were behind in payments by at least one month or already in foreclosed housing inventories.

Among homeowners holding their first mortgage loans, a record high of 1.37 percent have received default and foreclosure notices. In the previous quarter, 1.08 percent of homeowners were given notices of foreclosures.

MBA also reported that prime mortgage loans accounted for 65 percent of $9.9 trillion outstanding first mortgage loans.

Jed Kolko, associate research director at the San Francisco-based Public Policy Institute of California, said that the housing sector will not be the first to recover although it was among the major causes of the recession.

Kolko explained that the worsening employment situation and the adjustment of ARM loans would cause more defaults and force more Americans out of foreclosed housing.

The percentage of mortgage loans in various stages of foreclosure increased to 3.85 percent in the first quarter, an increase from the 3.3 percent in last year’s fourth quarter and a rise of 2.47 percent from the first quarter of 2008.

Brinkman also added that there were significant numbers of re-defaults in the first quarter and that up to 40 percent of foreclosed housing during the quarter were vacant homes.

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