June 5, 2008 / 2:13 PM / 11 years ago

U.S. mortgage foreclosures hit record high

WASHINGTON (Reuters) - U.S. home foreclosures and mortgage delinquencies hit record highs in the first quarter as the sharp housing downturn put more American households under financial strain, data released on Thursday showed.

A foreclosed home is seen in Stockton, California in this May 13, 2008 file photo. REUTERS/Robert Galbraith/Files

Nearly one in a hundred homes, or 0.99 percent, were driven into a foreclosure proceeding in the first quarter, the Mortgage Bankers Association said, up from 0.83 percent in the fourth quarter and the highest on records dating to 1979.

As the pace of failing loans quickened, the trade group said the overall share of homes in foreclosure rose to an all-time high of 2.47 percent from 2.04 percent. At the same time, the mortgage delinquency rate rose to a record 6.35 percent, suggesting foreclosures are likely to continue to mount.

The association said that while the national home loan picture darkened overall, risky loans written in a handful of states accounted for the largest share of failing mortgages.

“The national increase is clearly driven by certain loan types in certain states,” said MBA senior researcher Jay Brinkmann.

Arizona, California, Florida and Nevada account for a quarter of outstanding home loans and 42 percent of foreclosure starts, the trade group said.

While many regions of the country should see their rate of failing loans hit bottom by the end of the year, troubles in those four coastal and southwest states will persist for longer, Brinkmann said.

“The magnitude of the problem there is kind of dwarfing developments in the rest of the country,” he said.

The performance of riskier and safer loan types is remarkably different in all parts of the country, the group said in its report.

Among prime loans, which are extended to borrowers with good credit, the delinquency rate was 3.71 percent compared to 3.24 percent in the last quarter. The delinquency rate for subprime loans, available to borrowers with shaky credit, climbed to 18.79 percent from 17.31 percent in the previous quarter.

The increase in foreclosures is largely driven by sinking home values, which leaves borrowers with a home worth less than the mortgage and gives an incentive to simply walk away from a house. About 1.2 million foreclosed homes should return to the market this year, a research note from Lehman Brothers said.

“Rising foreclosures add to an already bloated inventory, crowd out regular sales and further depress home prices. The housing pain looks set to continue,” the research note said.

Editing by Andrea Ricci; Editing by Tom Hals

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