NEW YORK - Home foreclosures as well as the rate of homes entering the foreclosure process rose to a record in the third quarter as homeowners battled slumping house prices and spiking loan payments, the Mortgage Bankers Association said yesterday.
About 994,000 US households are in foreclosure, said MBA's chief economist, Doug Duncan, adding that "not all of them will lose their house, but that's how many are currently at serious risk of losing their house."
The percentage of loans in foreclosure rose to 1.69 percent of loans outstanding, up 0.29 percentage point from the prior quarter and up 0.64 from a year earlier.
Problems with payments on all loan types drove up the pace of homes entering the foreclosure process, the trade group said.
"Over-easy monetary policy, a 'hands-off' regulatory approach, reckless real estate speculation, and the complete abandonment of prudent lending practices by the mortgage industry created a housing bubble," said Mike Larson, real estate analyst at Weiss Research in Jupiter, Fla.
Subprime adjustable-rate mortgages represented just 6.8 percent of all loans, but made up 43 percent of loans entering the foreclosure process in the third quarter. The rate of foreclosures started rose to a seasonally adjusted 0.78 percent in the third quarter, up 0.13 of a percentage point from the prior quarter and up 0.32 from a year earlier.
This was the first quarter in which the effect of the credit crisis, which effectively shut down the jumbo mortgage market, economic weakness, broad-based home price drops, and loan rate resets for adjustable mortgages all came together, Duncan said.
A massive supply of unsold homes is dragging prices lower, which in turn is leading to more late payments and foreclosures. More foreclosures mean even more inventory of unsold homes.
Late payments on mortgages jumped to the highest level since 1986, according to the survey, which covers 85 percent of the mortgage market.
While the rate of homes entering the foreclosure process has risen to the highest levels on subprime mortgages, the pace is rising for higher-quality loans, too.
The rate for prime ARMs rose to 1.02 percent in the third quarter, from 0.30 percent a year earlier, as subprime ARMs rose to 4.72 percent from 2.19 percent.