By Lynn Adler
NEW YORK, March 5 About one in eight U.S.
homeowners with mortgages, a record share, ended 2008 behind on
their loan payments or in the foreclosure process as job losses
intensified a housing crisis spawned by lax lending practices,
the Mortgage Bankers Association said on Thursday.
With unemployment at a 16-1/2-year high and expected to
continue rising until mid- to late 2010, more borrowers will
pay late or fall into foreclosure this year, said the group's
"While California, Florida, Nevada, Arizona and Michigan
continue to dominate the delinquency numbers, some of the
sharpest increases we saw last quarter in loans 90 days or more
delinquent were in Louisiana, New York, Georgia, Texas and
Mississippi, signs of the spreading impact of the recession,"
said Jay Brinkmann.
Duress is no longer isolated to borrowers with lower credit
quality. As joblessness grew, so did late payments on prime
fixed-rate loans that represent two-thirds of mortgages.
U.S. President Barack Obama's $275 billion housing stimulus
program will standardize modifications for distressed loans and
pave the way for more refinancing.
That should smooth differences caused by various moratoria
by states and companies that temporarily curbed the surge in
foreclosures in the fourth quarter, Brinkmann said.
"But keep in mind that there are three drivers to the
housing problem, and this program of course addresses mostly
the first one," he added, referring to loan structure,
underwriting quality and fraud.
The two other problems -- an oversupply caused by
overbuilding and foreclosures, and unemployment -- still loom
Having one in eight households late paying or in
foreclosure is "unacceptable in a country like ours," said
Nicholas Bratsofolis, senior managing director of structured
refinance at mortgage bank LendAmerica in Melville, New York.
"Instead of wringing our hands, I think we should start
utilizing the tools that the government has given to us to
remedy the ills that are facing many of these homeowners," he
A record 11.18 percent of loans on one-to-four unit
residences were at least one payment past due or in the
foreclosure process in 2008.
The delinquency rate jumped 2.06 percentage points from a
year ago to a record 7.88 percent. The share of loans in the
foreclosure process leaped 1.26 percentage points in the year
to a record 3.30 percent.
MBA started tracking the data in 1972.
Housing has yanked down the U.S. economy after being a key
driver of it earlier this decade. In a vicious cycle, a
weakening economy is now further siphoning demand for homes.
"In a recession like this, housing is never just about
housing," said Jed Kolko, associate research director at the
Public Policy Institute of California, in San Francisco.
"Unemployment leads to foreclosures, foreclosures contribute to
lower tax revenues, less consumer spending -- it's all
MORE STATES WITH MORE PROBLEMS
As the economy sours, more states have joined the five
that had been primary trouble spots for late payments and
"We see New York being influenced by the layoffs that we've
been seeing on Wall Street and some of the rest of the industry
associated with that," Brinkmann noted.
"Some of the Southern states that had construction-related
unemployment, whether it was forest product or plywood
manufacturing. Some of the tourism industry is now being hit,
certainly in Mississippi with the casinos, and in Florida."
Subprime adjustable-rate loans and prime ARM loans still
drive the late payments, but that is shifting.
"We will continue to see, however, a shift away from
delinquencies tied to the structure and underwriting quality of
loans to mortgage delinquencies caused by job and income
losses," Brinkmann said.
Of particular concern, he said, is rising joblessness for
people with college education or technical training. The rate
nearly doubled in the last half of 2008 to just under 4
"We saw some sharp pickups in delinquency rates with prime
loans and I think that's now going to continue as long as we
see unemployment continue to climb among the people most likely
to own homes," Brinkmann said.
How high unemployment in that segment of the population
gets and how long it stays there will "determine ultimately how
long the prime fixed loan delinquencies continue to climb," he
said. "Some of these people do have adequate reserves to last
maybe six months or a year without a job. But the longer this
thing goes on, the quicker they then run through those reserves
and their loans go delinquent."
(Editing by Dan Grebler)