Loan Defaults, House Repo Continue to Increase in Washington

In the second quarter of this year, the number of loan defaults and house repo continue to increase in Washington. And as in the case also of the nationwide foreclosure increase, the rising unemployment is the major factor being blamed for the slump in the housing market.

But industry analysts pointed out that despite the increase from April to June, the number of distressed properties in Washington remained low compared with national figures and other states such as Arizona and California.

For the period, 5.82 percent of residential mortgage loans in Washington were delinquent for at least a month. Additionally, 2.47 percent of mortgage loans were in foreclosures and over 1 percent were in some kind of foreclosure proceedings.

Compared with the first quarter of this year, loan delinquencies increased by 11.9 percent in the second quarter and 72 percent from the same period a year ago. Furthermore, foreclosure starts from April to June rose by 47 percent while the total number of actual foreclosures increased by 37 percent, compared with the first quarter figures.

Foreclosure starts were also higher by 110 percent and actual foreclosures by 138 percent compared with second quarter figures the previous year.

Nationwide, about 8.86 percent of mortgage loans were about a month delayed in payments, 1.4 percent of homeowners were in some kind of foreclosure proceedings while 4.3 percent were under foreclosures from April to June. The national delinquency rate for the second quarter was higher compared with the first quarter.

Meanwhile, the rates of default and foreclosures involving fixed-rate, prime loans remained low compared with other mortgages, in particular the adjustable-rate subprime which fuels the current foreclosure crisis.

However, the pace of the increase in defaults and foreclosure rates was significantly faster among borrowers of fixed-rate, prime loans compared with other mortgages in Washington and across the country.

According to industry analysts, the current trend showed that unemployment is the factor that drives the default and foreclosure increases, not only in Washington but in other areas in the country. They pointed out that one in every three foreclosure starts is a borrower of fixed-rate, prime loans.

They said that in 2008, one in every five foreclosures was a borrower of prime mortgage loans. They believed that for a decline in default and foreclosure rates to occur, reductions in unemployment rate should happen first.

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