A '09 Milestone: One Million Foreclosure Starts

Washington-Current delinquency and foreclosure rates are reaching milestones.

According to the Center for Responsible Lending a new foreclosure starts every 13 seconds, equaling nearly 6,500 a day. CRL data show the number of new foreclosure starts for the first five months of 2009 has reached one million.

CRL projects a total of 2.4 million foreclosure starts by the end of the year, which is expected to reduce "property values of some 70 million nearby households" by about $502 billion, or at an average of $7,200 for homeowner.

At the same time, the Mortgage Bankers Association said new 4Q08 survey data show 12% of all mortgages are now delinquent, representing "the highest level since the MBA started measuring 37 years ago." CRL president Michael Calhoun called the situation "alarming. Foreclosures started today's crisis and foreclosures will keep the crisis going if this epidemic continues," he said.

Longer-term CRL projections show that by 2012 at least 9 million new foreclosures will cost $1.9 trillion in lost home equity to 92 million families.

A recent mortgage trends analysis by TransUnion.com of Chicago based on data from approximately 27 million anonymous, randomly sampled customer credit files also show mortgage loan delinquency ratio among borrowers 60 or more days past due increased for the ninth straight quarter, hitting a national average high of 5.22% for the first quarter of 2009.

This statistic traditionally seen as a precursor to foreclosures, TransUnion.com said, is up almost 14% from the previous quarter's 4.58% average - compared to an increase of 16% from the third to fourth quarter of 2008. Also, year-over-year, mortgage loan delinquency is up approximately 62% up from 3.23%.

"The troubling news is that the mortgage delinquency rate continues to climb upward at an average quarterly pace almost doubling that experienced in the last recession," said Keith Carson, a senior consultant in TransUnion's financial services group. "For example, during the 2001 recession (which began in March and ended in November of that year), the average quarter-to-quarter national mortgage delinquency growth rate was nearly 6.5%, compared to the nearly 12% quarter-to-quarter delinquency growth we are experiencing today."

Mortgage borrower delinquency rates in the first quarter of 2009 were highest in Nevada (11.61%) and Florida (11.01%), with the lowest delinquency rates reported in North Dakota (1.51 %), South Dakota (1.94%) and Alaska (2.14%). Meanwhile, the average national mortgage debt per borrower rose again by 1.41% to $195,500 from the previous quarter's $192,789, painting a difficult year for many homeowners.

"Forecasts now show the 2009 mortgage delinquency rates reaching 7% by yearend," according to Mr. Carson. "Credit performance generally lags economic conditions. Thus although there have been some pockets of promising news on the economic front, we see unemployment and deflated housing prices continuing to push up delinquency rates through the remainder of this year. At this juncture it is difficult to predict with any certainty what impact, if any, the various government initiatives will have on the mortgage delinquency."