Tags: Mortgage | Foreclosures | Rise | Record | Unemployment

Mortgage Foreclosures Rise to Record on Unemployment

Thursday, 18 Nov 2010 12:29 PM

Foreclosures on prime fixed-rate mortgages in the U.S. jumped to a record in the third quarter as unemployment strained household budgets of the most credit-worthy borrowers.

The inventory of homes in foreclosure financed by prime fixed-rate loans rose to 2.45 percent from 2.36 percent in the previous three months, the Mortgage Bankers Association said in a report today. New foreclosures rose to 0.93 percent from 0.71 percent. Both numbers were the highest in the 12 years since the Washington-based trade group started tracking the categories.

Homeowners are falling behind on their mortgage payments as job cuts make it difficult for them to pay bills, according to Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics. The unemployment rate has stayed above 9 percent for 18 consecutive months, the longest stretch since 1983, according to the Bureau of Labor Statistics.

“The increase in these plain-vanilla type of loans to the highest numbers ever show us it really is being driven by the economic environment,” Fratantoni said in a telephone interview. “It’s not going to turn around until we get more significant job growth.”

New foreclosures against all types of mortgages, which also include subprime, rose to 1.34 percent, the highest level in a year, according to the report. The overall inventory of loans in foreclosure dropped to 4.39 percent from 4.57 percent as some mortgages were modified by servicers, companies that administer payments. Those modified loans may reappear as foreclosures in future quarters because of redefaults, said Fratantoni.

Defaulting Again

“The modification programs have helped a number of borrowers, but at the same time we do see redefault rates of around 50 percent at 12 months,” Fratantoni said.

The share of mortgages with overdue payments dropped to 9.13 percent in the third quarter from 9.85 percent in the prior period, the trade group’s report showed. The decline was led by mortgages 90 days or more overdue, another reflection of the increase in modified loans, Fratantoni said. That category fell by almost half a percentage point to 4.34 percent, he said.

Servicers modified 108,946 mortgages in the second quarter using the Obama administration’s primary anti-foreclosure plan, the Home Affordable Modification Program, or HAMP. That was an 8.7 percent increase from the prior period, according to U.S. Treasury Department data. Using private programs, the companies altered an additional 164,473 home loans, a gain of 25 percent, the data show.

HAMP lowers mortgage payments to about a third of borrowers’ income by temporarily reducing interest, lengthening the term of the loan and deferring principal payments.

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Foreclosures on prime fixed-rate mortgages in the U.S. jumped to a record in the third quarter as unemployment strained household budgets of the most credit-worthy borrowers.The inventory of homes in foreclosure financed by prime fixed-rate loans rose to 2.45 percent from...
Mortgage,Foreclosures,Rise,Record,Unemployment
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2010-29-18
Thursday, 18 Nov 2010 12:29 PM
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