Foreclosures hit all-time high
Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments.
By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report's quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.
"Boy, that was ugly," said Jared Bernstein, an Economic Policy Institute economist of the data.
"It's another reminder that anyone who thought we had hit bottom was wrong. This was a huge bubble, and when a bubble of this magnitude breaks, it creates a huge mess," he said." It could take a lot longer for the correction to work through the system."
One reason it may take so long is that there seems to be no end in sight for falling home prices.
"Declining prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state," said Doug Duncan, MBA's Chief Economist said in a prepared statement.
The foreclosure rates for prime and subprime adjustable rate mortgages both more than doubled compared with a year ago, from 0.41% for prime ARMs to 1.06% and from 2.70% for subprime ARMs to 5.29%.
"In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell their homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face," said Duncan.
"As prices plummet -- already some California and Florida areas have seen price drops of 25% or more, according to Duncan -- defaults will soar.
And falling prices and growing foreclosures create a vicious cycle; the more prices fall the less likely it is that borrowers can use home equity to refinance into more affordable loans, which leads to more defaults. And as foreclosures rise housing inventory increases, further depressing prices.
Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments.
By Les Christie, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report's quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.
"Boy, that was ugly," said Jared Bernstein, an Economic Policy Institute economist of the data.
"It's another reminder that anyone who thought we had hit bottom was wrong. This was a huge bubble, and when a bubble of this magnitude breaks, it creates a huge mess," he said." It could take a lot longer for the correction to work through the system."
One reason it may take so long is that there seems to be no end in sight for falling home prices.
"Declining prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state," said Doug Duncan, MBA's Chief Economist said in a prepared statement.
The foreclosure rates for prime and subprime adjustable rate mortgages both more than doubled compared with a year ago, from 0.41% for prime ARMs to 1.06% and from 2.70% for subprime ARMs to 5.29%.
"In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell their homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face," said Duncan.
"As prices plummet -- already some California and Florida areas have seen price drops of 25% or more, according to Duncan -- defaults will soar.
And falling prices and growing foreclosures create a vicious cycle; the more prices fall the less likely it is that borrowers can use home equity to refinance into more affordable loans, which leads to more defaults. And as foreclosures rise housing inventory increases, further depressing prices.
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