Friday, December 7, 2007

How Bad is It?

The Mortgage Bankers' Association (MBA) just reported that home mortgage foreclosures hit a record high in the third quarter of 2007. the new record is 0.78 foreclosures per hundred. The previous record, set in 2Q2007 was 0.65, more than double the rate 0.32 in 2Q2006.

MBA reported that 0.78 percent of all home mortgages entered the foreclosure process in 3Q2007. That's up from 0.65 percent in the second quarter - the previous record high - and more than double the 0.32 percent rate a year earlier. The total percentage of home loans in foreclosure as of 2Q2007 is also a record high 1.69 percent

How many loans are in trouble? One way to think about the magnitude of the problem is to consider the perentage of loans in default. MBA reports that 5.59 percent of borrowers are now at least 30 days late making their mortgage payments, which is just below the record high of 5.68 percent set in 1986. 1.26 percent of the borrowers were 90-plus days late. Record high rates of mortgage delinquency bode badly for the future. A high percentage of borrowers 90 days or more behind in their mortgage indicates that the borrowers have no options to sell, refinance or borrow against equity to make the payments and buy more time. For these borrowers, foreclosure is inevitable. MBA's economists predict that foreclosures and delinquency rates will continue to climb at least through the third quarter of 2008.

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