More Homeowners Falling Behind on Mortgages

By JAMES R. HAGERTY

About one in seven American households with mortgages is behind on payments or in foreclosure, according to new data from the Mortgage Bankers Association. That is up from about one in 10 a year ago.

The trade group reported Thursday that 14.4% of first-lien mortgages on one- to four-family homes in the third quarter were 30 days or more overdue or in the foreclosure process. That is the highest since the MBA began reporting such data in 1972 and works out to about 7.5 million households at risk of losing their homes. The percentage is up from 10% a year earlier and 7.3% two years ago.

Loan defaults have been rising swiftly for more than three years. At first, the problem largely reflected loose lending practices during the housing boom that allowed millions of people to buy homes they couldn’t afford. Now the problem is compounded by rising unemployment, which hit 10.2% in October, the highest since 1982.

Unemployment may start gradually declining in next year’s first half, said Jay Brinkmann, the MBA’s chief economist. If so, he said, the percentage of loans that are delinquent could start to decline by mid-2010. But he said the number of loans in foreclosure is likely to remain elevated longer as banks struggle to figure out which borrowers might be able to stay in their homes if payments are lowered.

Largely because of efforts to sort through mounds of paperwork and figure out which borrowers qualify for lower payments, there has been a jump in the number of people far behind on payments but not yet in foreclosure. About 4.4% of the loans were 90 days or more past due but not in foreclosure in the latest quarter, up from 2.2% a year earlier.

The states with an above-average rate of such “seriously delinquent” loans are Nevada (7.8%), Florida (6.1%), Arizona (6%), Michigan (5.9%), California (5.9%), Mississippi (5.5%), Georgia (5.1%) Indiana (5.1%), Illinois (4.8%) and Rhode Island (4.5%).

The states with the highest rate of home loans in foreclosure are Florida (12.7%), Nevada (9.4%), Arizona (6.2%), California (5.8%), New Jersey (5.5%), Illinois (5.3%) and Ohio (4.6%). North Dakota had the lowest rate at 1.1%.

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