A record number of homeowners entered the foreclosure process during the first quarter. The previous high was set in the final quarter of 2006. This stems from the stress on the housing market, according to a report by the MBA (Mortgage Bankers Association). Borrowers are having more trouble meeting payments as house prices flatten or decline in much of the country and as many loans that had low introductory rates reset to sharply higher ones.
The trade group predicts that delinquencies would most likely rise in the near future, a reach a highest point later this year. "Our view is that we will probably see modest increases in delinquencies and foreclosures for the next couple of quarters," Mr. Duncan, MBA's chief economist said.
Seasonally adjusted, 0.58% of loans entered the foreclosure process last quarter, compared with 0.54% in the fourth quarter of 2006 and 0.41% in last year's first quarter. The rates for the past two quarters are the highest in the survey's 37-year history. The percentage of loans now in the foreclosure process rose to 1.28%, up from 0.98% a year earlier. The delinquency rate on prime loans rose in the first quarter to 2.58% from 2.25% a year earlier. For subprime loans, the rate increased to 13.77% from 11.5%. Delinquency rates on prime adjustable-rate mortgages rose to 3.69% from 2.3% a year earlier. On subprime ARMs, the rate climbed to 15.75% from 12.02%.
One factor likely to restrain rises in the foreclosure rate, at least in the near term, is the willingness of many loan servicers -- firms responsible for collecting payments -- to lower interest rates or stretch out payment schedules for some borrowers who fall behind. However, sometimes these payment-lowering plans just delay foreclosure rather than prevent it.
Source: RealEstate Journal