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Foreclosures Continue at Record Levels

One of every seven subprime borrowers is delinquent, report finds

by Martin H. Bosworth
ConsumerAffairs.com

September 6, 2007

The MBA report found that homes entering foreclosure were at 0.65 percent of all outstanding loans, an increase from the previous high of 0.58 percent for the first quarter of 2007.

The MBA's quarterly reports have been tracking a consistent increase in foreclosures across the country for the past several financial quarters.

Delinquent payments rose to 5.12 percent of all outstanding loans, an increase of 73 seasonally-adjusted points from the previous year. Delinquencies for subprime borrowers increased to 14.82 percent, roughly one of every seven outstanding subprime loans, according to the report.

MBA vice-president and senior economist Doug Duncan pointed to the continuing collapse of formerly hot housing markets in California, Nevada, Florida, and Arizona as responsible for extending the foreclosure epidemic.

"Were it not for the increases in foreclosure starts in those four states, we would have seen a nationwide drop in the rate of foreclosure filings," Duncan said.

"Thirty four states had decreases in their rates of new foreclosure and the increases were very modest in the states with increases, other than those four," Duncan said. "The four states of California, Florida, Nevada and Arizona have more than one-third of the nation’s subprime ARMs, more than one-third of the foreclosure starts on subprime ARMs, and are responsible for most of the nationwide increase in foreclosure actions."

RealtyTrac's regular foreclosure reports also show record-breaking foreclosures in those four states and other collapsing markets, with a 93 percent increase in overall nationwide foreclosures since July 2006.

The epidemic of foreclosures across the nation has triggered calls for help from consumer and civil rights groups such as ACORN, who called on lenders to impose a moratorium on foreclosures of homes bought with subprime loans.

The coalition wants greater protection for black and Latino families from predatory lenders, who often target minorities with expensive subprime loans, even when they could qualify for loans at "prime" rates.

A task force of several Federal agencies has asked lenders to work with borrowers in trouble, providing them leeway to defer payments or convert nontraditional loans to conventional fixed-rate loans.

The task force has also promised stronger oversight of subprime lenders and stricter rules under which they can offer mortgages.

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