Mortgage foreclosures set record as Bush plan unveiled

By Lynn Adler

NEW YORK (Reuters) - U.S. home foreclosures as well as the rate of homes entering the foreclosure process rose to a record in the third quarter, as homeowners battled slumping house prices and spiking loan payments, the Mortgage Bankers Association said on Thursday.

President George W. Bush unveiled a plan on Thursday to stem foreclosures, which many analysts said was a good start but would be a minimal cure for the sickly housing market.

The program would freeze low teaser mortgage rates for five years for some of the 2 million home owners with adjustable-rate loans facing sharply higher payments, helping them avert default, according to the administration.

About 994,000 U.S. households are in the process of foreclosure, said MBA's chief economist Doug Duncan, adding that "not all of them will lose their house, but that's how many are currently at serious risk of losing their house."

The percentage of loans in the foreclosure process rose to 1.69 percent of loans outstanding, up 0.29 percentage point from the prior quarter and up 0.64 from a year earlier.

Problems with payments on all loan types drove up the pace of homes entering the foreclosure process, the trade group said in its delinquency and foreclosure survey,

"Over-easy monetary policy, a 'hands off' regulatory approach, reckless real estate speculation, and the complete abandonment of prudent lending practices by the mortgage industry created a housing bubble," said Mike Larson, real estate analyst at Weiss Research in Jupiter, Florida.

"Now that bubble has burst and we all have to deal with the consequences," he said.