U.S. Mortgage Delinquencies Reach a Record High
The economy and the stock market may be recovering from their swoon, but more homeowners than ever are having trouble making their monthly mortgage payments, according to figures released Thursday.
Nearly one in 10 homeowners with mortgages was at least one payment behind in the third quarter, the Mortgage Bankers Association said in its survey. That translates into about five million households.
The delinquency figure, and a corresponding rise in the number of those losing their homes to foreclosure, was expected to be bad. Nevertheless, the figures underlined the level of stress on a large segment of the country, a situation that could snuff out the modest recovery in home prices over the last few months and impede any economic rebound.
Unless foreclosure modification efforts begin succeeding on a permanent basis — which many analysts say they think is unlikely — millions more foreclosed homes will come to market.
“I’ve been pretty bearish on this big ugly pig stuck in the python and this cements my view that home prices are going back down,” said the housing consultant Ivy Zelman.
The overall third-quarter delinquency rate is the highest since the association began keeping records in 1972. It is up from about one in 14 mortgage holders in the third quarter of 2008.
The combined percentage of those in foreclosure as well as delinquent homeowners is 14.41 percent, or about one in seven mortgage holders. Mortgages with problems are concentrated in four states: California, Florida, Arizona and Nevada. One in four people with mortgages in Florida is behind in payments.
Some of the delinquent homeowners are scrambling and will eventually catch up on their payments. But many others will slide into foreclosure. The percentage of loans in foreclosure on Sept. 30 was 4.47 percent, up from 2.97 percent last year.
In the first stage of the housing collapse, defaults and foreclosures were driven by subprime loans. These loans had low introductory rates that quickly moved to a level that was beyond the borrower’s ability to pay, even if the homeowner was still employed.
As the subprime tide recedes, high-quality prime loans with fixed rates make up the largest share of new foreclosures. A third of the new foreclosures begun in the third quarter were this type of loan, traditionally considered the safest. But without jobs, borrowers usually cannot pay their mortgages.
“Clearly the results are being driven by changes in employment,” Jay Brinkmann, the association’s chief economist, said in a conference call with reporters.
In previous recessions, homeowners who lost their jobs could sell the house and move somewhere with better prospects, or at least a cheaper cost of living. This time around, many of the unemployed are finding that the value of their property is less than they owe. They are stuck.
“There will be a lot more distressed supply entering the market, and it will move up the food chain to middle- and higher-price homes,” said Joshua Shapiro, chief United States economist for MFR Inc.
Many analysts say they believe that foreclosures, instead of peaking with the unemployment rate as they traditionally do, will most likely be a lagging indicator in this recession. The mortgage bankers expect foreclosures to peak in 2011, well after unemployment is expected to have begun falling.
There was one sliver of good news in the survey: the percentage of loans in the very first stage of default — no more than 30 days past due — was down slightly from the second quarter. If that number continues to decline, at least the ranks of the defaulted will have peaked.
“It’s arguably a positive, but it doesn’t undermine the fact that there are still five or six million foreclosures in process,” Ms. Zelman said.
The number of loans insured by the Federal Housing Administration that are at least one month past due rose to 14.4 percent in the third quarter, from 12.9 percent last year. An additional 3.3 percent of F.H.A. loans are in foreclosure.
The mortgage group’s survey noted, however, that the F.H.A. was issuing so many loans — about a million in the last year — that it had the effect of masking the percentage of problem loans at the agency. Most loans enter default when they are older than a year.
When the association removed the new loans from its calculations, the percentage of F.H.A. mortgages entering foreclosure was 30 percent higher.
The association’s survey is based on a sample of more than 44 million mortgage loans serviced by mortgage companies, commercial and savings banks, credit unions and others. About 52 million homes have mortgages. There are 124 million year-round housing units in the country, according to the Census Bureau.