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By Julie Haviv
NEW YORK Nov 19 A record one in seven U.S.
mortgages were in foreclosure or at least one payment past due
in the third quarter, according to fresh data signaling the
recovery in the housing market will be tepid at best.
U.S. mortgage delinquency rates and the percentage of loans
that entered the foreclosure process also jumped to records
from July to September, the Mortgage Bankers Association said
Rising job losses were behind the increasingly bleak
portrait of the housing market in a trend that will continue
into next year, the group said in data that adds to recent
evidence of a still-struggling housing market.
Housing and related business account for about 20 percent
of the economy and recovery is essential to bring unemployment
down from a 26-1/2-year high and kick-start economic growth.
Yet record foreclosures will add to the growing supply of
unsold homes, sapping the housing market as it attempts to
recover from the worst slump since the Great Depression.
The MBA said the percentage of loans in foreclosure rose to
1.42 percent, from 1.36 percent in the second quarter and 1.07
percent in the third quarter of 2008.
"Foreclosures remain the biggest hurdle to the housing
recovery," said Michelle Meyer, economist at Barclays Capital
in New York.
"Foreclosures will be worse in the first part of 2010 and
we do not see a peak in foreclosures until the middle of next
More conservative, prime fixed-rate loans often sold to
homebuyers with the highest credit ratings continued to
represent the largest share of foreclosures started and were
the biggest driver of the increase in foreclosures, said MBA
chief economist Jay Brinkmann.
The delinquency rate for mortgage loans on one-to-four-unit
residential properties rose to a seasonally adjusted rate of
9.64 percent of loans outstanding, up from 9.24 percent in the
second quarter and 6.99 percent a year earlier, the MBA said.
The delinquency rate broke the record set last quarter,
based on MBA data going back to 1972. The rate includes loans
that are at least one payment past due but does not include
loans somewhere in the process of foreclosure.
The latest splash of cold water follows a stunning 10.6
percent plunge in housing starts for October, reported on
Wednesday. For details see [ID:nN1899353].
The combination of loans in foreclosure and at least one
payment past due was 14.41 percent on a non-seasonally adjusted
basis, the highest ever seen in the survey.
In fact, 33 percent of foreclosures started in the third
quarter were on prime fixed-rate loans and those loans were 44
percent of the quarterly increase in foreclosures, Brinkmann
"The foreclosure numbers for prime fixed-rate loans will
get worse because those loans represented 54 percent of the
quarterly increase in loans 90 days or more past due but not
yet in foreclosure," he said.
The percentage of loans in the foreclosure process at the
end of the third quarter was 4.47 percent, up from 4.30 percent
in the second quarter and 2.97 percent a year earlier.
Florida, California, Arizona and Nevada have a
disproportionate share of these problems, Brinkmann said.
They had 43 percent of all foreclosures started in the
third quarter, down from 44 percent both last quarter and the
third quarter last year. They had 37 percent of the nation's
prime fixed-rate loan foreclosure starts and 67 percent of the
prime adjustable-rate mortgage, or ARM, foreclosure starts.
At the end of September, 25 percent of mortgages in Florida
were at least one payment past due or in foreclosure, he said.
The outlook is for delinquency and foreclosure rates to
continue to worsen before they improve, Brinkmann said.
"First, it is unlikely the employment picture will get
better until sometime next year and even then jobs will
increase at a very slow pace," he said.
"Second, the number of loans 90 days or more past due or in
foreclosure is now a little over 4 million as compared with 3.9
million new and previously occupied homes currently for sale,
although there is likely some overlap between the two numbers,"
Therefore, the ultimate resolution of these seriously
delinquent loans will put added pressure on the hardest hit
sections of the country, Brinkmann said.
(Editing by James Dalgleish)