Foreclosures Break Records In The First Quarter

Posted in Foreclosures, June 13th, 2008 |

The increasing numbers of foreclosures, defaults and delinquencies have broken past records in the first quarter of 2008. The apprehension is that this trend will continue causing damage to the real estate market and the economy in general.

According to latest figures that proportion of loans that slipped into foreclosures increased by 0.99% through this quarter. It exceeded the previous record of 0.83 during the last quarter of 2007. The Mortgage Bankers Association noted that during this period more numbers of defaults and delinquencies have been recorded. The delinquency numbers jumped from 5.82% of the last quarter to 6.35% in the first quarter of the current year. The combined numbers of new foreclosures and late payments have beaten the last record of 1979.

Jay Brinkman of the Association analyzed that the fall in the real estate market has mired the situation and is today the biggest factor in the debacle. If the value of houses do not pick up then foreclosures are inevitable and will continue to rise in the forthcoming months.

Those who had weak credit history availed of the sub-prime loans. They are now the worst affected. Their loans are contributing to the increase in number. It was the sub-prime mortgages that initially triggered off the crisis. But the proportion of prime loans today has risen to 6.35%. In the last quarter it was 5.29%. Late payments jumped from 20.02% to 22.07%. The latter was the last record holding number. The Association has surveyed 45 million loans.

The trend that is being observed now is that foreclosures are now spreading its tentacles to those with prime conventional loans. The number of these loan going into foreclosure have increased from 0.41% in the last quarter of 2007 to 0.54% during the first quarter of the current year. Late payment numbers increase from 3.24% to 3.71%. In fact the compared to the ARM the number of prime borrowers going into foreclosure is higher. It jumped from 1.55% to 1.06%. The delinquency numbers jumped from 5.51% to 6.78%.

Brinkman stresses that the most important thing is to see that that real estate market returns to its level. The regions where new development had taken place are the worst hit. Problems are aggravated by unemployment, illness and divorce. Previously one could sell the house and get out of the net but today falling house prices is making that impossibility.