$750B in Mortgage Debt Past Due

Washington-The national mortgage delinquency rate - which includes both prime and subprime mortgages - climbed to a record 7.88% in the fourth quarter with subprime late payments reaching a staggering 21.88%, according to new figures released by the Mortgage Bankers Association.

Figures compiled by Mortgage Servicing News show that Americans owe $9.6 trillion on their loans, which means $756 billion in residential mortgage debt is delinquent. Also, $196 billion in subprime debt is 30 days or more late.

Prime foreclosures started in the quarter increased to 1.88% of outstanding loans, double last year's rate. The only positive in the numbers: the rate at which homes are going into foreclosure was flat but as MBA chief economist Jay Brinkmann noted, "This is mainly attributable to various state and local moratoria on foreclosure sales" and similar actions taken by Fannie Mae and Freddie Mac.

But even though the rate of foreclosures may be flat the foreclosure inventory numbers are huge, 6.3% of all loans and 23.11% of subprime mortgages are seriously delinquent or in foreclosure. The South and Midwest have the highest delinquency rates, 9.4% and 8.58%, respectively.

To the surprise of no one, subprime ARMs continue to be a major problem for the industry. At year-end, only 52% of all subprime ARMs nationwide were current.

But other loan types are going delinquent in record numbers as well. "When we look at where the changes are coming, clearly we see increases in the prime fixed and subprime fixed categories," said Mr. Brinkmann.

One concern is that although California, Florida and Nevada are leading the foreclosure charts, the problem has spread to states like New York and its metropolitan area, which has suffered huge severe job losses because of Wall Street's crash.

Also, across the nation servicers saw an increase in delinquencies among college educated, prime loan borrowers who are losing their jobs, too.

If earlier delinquencies were caused by predatory lending and poor underwriting - resulting in mortgages being made to consumers who should not have received them - recent late payers have been hurt by a tremendously weak job market which may not improve until 2010.

Meanwhile, the mortgage delinquency rate for borrowers 60 or more days past due increased for the eighth straight quarter, reaching 4.58% in the fourth quarter, a 53% increase from the same period a year ago, according to a new report from TransUnion, Chicago.

In the third quarter the ratio, a national average, stood at 3.96%. Borrower delinquency rates in the fourth quarter were highest in Florida (9.52%) and Nevada (9.01%), while the lowest rates were found in North Dakota (1.21%), Alaska (1.74%) and South Dakota (1.97%).

The three areas showing the greatest percentage growth in delinquency from the previous quarter were Arizona (26.2%), Montana (24.5%) and South Dakota (23.9%).

Consistent with past reports, subprime and ARMs showed the highest overdue.

Next in News ►