Foreclosure Rates Climb

wall street journal

WASHINGTON -- A record number of homeowners entered the foreclosure process during the first quarter, breaking a record set in late 2006 and reflecting further stress on the housing market, according to a Mortgage Bankers Association survey released Thursday.

Soft housing prices and a wave of resetting adjustable-rate mortgages were expected to show up in foreclosure and delinquency data, but it appears the stress wasn't confined to high-risk subprime loans as other mortgages showed signed of weakening.

On a seasonally adjusted basis, 0.58% of loans entered the foreclosure process during the quarter, compared with 0.54% in the fourth quarter of 2006. Such levels are unprecedented in the 37-year history of the survey. MBA reported that foreclosure rates were much steeper in California, Florida, Arizona and Nevada than in other parts of the country.

The percentage of loans in the foreclosure process rose to 1.28%, up from 1.19% in the fourth quarter and 0.98% in the first quarter of 2006.

The association reported that troubles in states Ohio, Michigan, Indiana, California, Florida, Nevada and Arizona weighed down the housing and foreclosure numbers, with the economic problems in the Midwest combining with price movements in the other states to create a tougher environment.

"The rate of delinquencies is being driven by what is taking place in seven states," MBA chief economist Doug Duncan said in a press release.

The delinquency rate on one-to-four family properties was 4.84% for the quarter, down from 4.95% in the fourth quarter of 2006 but up from 4.42% in the first quarter of 2006.

Data varied widely from state to state. For example, California, Florida, Nevada and Arizona were the main reason that the foreclosure rate on subprime adjustable-rate mortgages jumped to 3.23% for the quarter, MBA said. In 26 other states, the foreclosure rate on subprime ARMs decreased.

The delinquency rate on prime loans rose in the first quarter to 2.58% from 2.57% in the fourth quarter. For subprime loans the delinquency rate rose to 13.77% from 13.33%. Delinquencies on prime adjustable-rate mortgages rose to 3.69% in the first quarter from 3.39% in the fourth quarter. Delinquency rates on subprime ARMs rose to 15.75% from 14.44%.

The foreclosure inventory of prime loans rose to 0.54% from 0.50% in the fourth quarter. For subprime loans, 5.1% were in foreclosure in the first quarter compared with 4.53% in the fourth quarter.