Magazine article American Banker

MBA: Two States' Foreclosure Issues Retarding U.S. Recovery

Magazine article American Banker

MBA: Two States' Foreclosure Issues Retarding U.S. Recovery

Article excerpt

Byline: Kate Berry

The outlook for the housing market will continue to worsen until foreclosures and defaults decline in California and Florida, where falling housing prices are making it harder to cure problem loans, the Mortgage Bankers Association said Friday.

"We are unlikely to see a national turnaround until we see a turnaround in California and Florida," Jay Brinkmann, the MBA's chief economist, said on a conference call with reporters. "Were the economy to deteriorate more, and if we have issues with job losses, that would also delay an apparent bottom in the housing market."

According to the MBA's quarterly survey released Friday, the nation's overall delinquency rate, which measures loans that are 30 days or more past due but not yet in foreclosure, rose 6 basis points from the first quarter and 129 basis points from a year earlier, to 6.41% in the second quarter - the highest rate in 29 years.

The percentage of loans entering foreclosure also set a record (1.19%), as did the share of loans already in the foreclosure process (2.75%). Taken together, 9.16% of all loans nationally were either delinquent or in foreclosure in the second quarter.

California and Florida accounted for a combined 39% of all new foreclosures or foreclosure starts in the second quarter, the survey found.

Florida had the highest number of loans in the second quarter that were 90 or more days past due, at 6%, followed by Nevada at 4.92%, Ohio at 3.97%, and California at 3.86%.

Mr. Brinkmann said many borrowers overextended themselves to get into expensive housing markets such as California by "making the minimum payment" on option adjustable-rate mortgages.

Now, with housing prices falling and "a mandatory kick-in of the maximum payment," those borrowers are unable either to sell their homes or afford the higher payments, leading to more foreclosures, he said. …

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