By Renae Merle
Washington Post Staff Writer
Thursday, March 5, 2009 1:26 PM
The number of homeowners falling behind on their mortgages or already in foreclosure surged to record highs during the fourth quarter, according to industry data released today.
About 7.88 percent of mortgage loans were delinquent during the quarter, according to the survey by the Mortgage Bankers Association, an industry group. It is up from 5.82 percent during the same period a year earlier. Another 3.3 percent were in the foreclosure process, up from 2.04 percent a year ago. Both figures set records. Taken together, they mean that more than 11 percent of home mortgages are now in some form of distress. The association began keeping records in 1972.
The trend highlights the challenge facing the Obama administration as it launches a foreclosure prevention program that will pay incentives to lenders to encourage them to lower homeowners' payments to affordable levels. The administration aims to help up to 9 million homeowners either refinance their mortgages or attain a loan modification that keeps them out of foreclosure.
The House is also expected to vote today on legislation to allow bankruptcy judges to modify the mortgages of struggling borrowers. The financial services industry has fought the legislation for years, but after the foreclosure crisis deepened and Democrats gained greater control in Congress, the legislation gained traction.
Increasingly, homeowners are becoming delinquent after losing a job rather than because they are struggling with a risky loan, the Mortgage Bankers Association and analysts said. Falling home prices are exacerbating the problem, they said.
"The collapse in former bubble markets drove the first wave of delinquencies and foreclosures. Now, we're experiencing a second, more powerful wave," Mike Larson, a housing analyst with the Weiss Group, an economic research firm in Florida, said in a research note.
There is also a large backlog of homes that are seriously delinquent, meaning payments are 90 days or more late. That potentially swells the foreclosure inventory, according to the data. About 6.3 percent of loans were seriously delinquent during the fourth quarter, compared with 3.62 percent during the same period a year earlier.
The backlog is probably tied to foreclosure moratoriums throughout the country, the industry group said. Also, some areas have been overwhelmed by an increase in foreclosures and local governments have been unable to process foreclosures quickly. "Normally servicers would have initiated foreclosure actions on a significant portion of these loans but delayed doing so for a variety of reasons," Jay Brinkmann, the group's chief economist, said in a statement.
The hardest-hit states continue to be California, Florida and Nevada, but Louisiana, New York and Georgia have also seen sharp increases in delinquencies, indicating that the recession is spreading, the group said.
Delinquency rates in the Washington region are below the national average. In the District, 4.38 percent of loans included in the survey were seriously delinquent or in foreclosure during the fourth quarter, compared with 2.07 percent a year earlier. About 5.52 percent of mortgages in Maryland were in similar trouble, compared with 2.54 percent a year earlier. The rate locally was lowest in Virginia, where 3.83 percent of loans were either seriously delinquent or in foreclosure. That is up from 2.13 percent a year earlier.