Second Quarter Sees Foreclosures Rise But Delinquencies Fall

Although the second quarter saw a record number of increases in foreclosure, on the happy side is the fall in delinquency numbers. According to Mortgage Bankers Association although sub-prime mortgage loans fell, those in the prime category increased. The prime loans occupy a sizeable chunk in house mortgages.

Experts opine that the foreclosure increases coupling with rising job loss will put great pressure on the housing market in the forthcoming year also. At the end of June, 2.75% of all house mortgages counting to 1.75 million mortgages had entered the foreclosure stage. This was a spike of 2.47% from the end of the first quarter of this year. In fact it was a record since 1979 – the year from which the association has been compiling data.

The number of loans in default by less than 90 days decreased to 4.58%. At the time of the start of the decline in 2006 the fall was by 4.72% Foreclosure numbers continued to be the highest in the states of California, Florida, Michigan, Nevada and Ohio.

Experts analyze this decline in delinquency numbers in many ways. During spring and early summer federal tax rebates became effective allowing many families to keep up with their mortgages. Attempts at loan modification also helped to bring down numbers. But with the economy weakening the effects of the rebates and modifications are being wiped out. According to the Labour Department the rate of unemployment jumped to 6.1% in August as compared to 5.7% in July. Celia Chen of Moody’s Economy opines that this will ultimately tell on the foreclosure market and trigger off more casualties.

Prime loans have become the latest centre of concern. These are now accounting for the majority of the outstanding mortgages. Since the last 18 months or so the delinquencies in this category of loans have been rising. Many say it will further increase and add to the foreclosure crowd. At the end of the second quarter 5.35% of the prime loans were stumbling or had entered the foreclosure state. This was an increase from 4.93% of March. In contrast 30.48% of the sub-prime loans were in similar plight – either in or about to enter foreclosure. It is a spike by 29.53%.

The entry of prime loans into the foreclosure fields show that causes have gone beyond the obvious reason of interest hike to something much more ominous – the slump in the general economy.

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