Home Foreclosures Hit Record High
By Richard Leong
06/21/03: NEW YORK (Reuters) - U.S. mortgages in foreclosure climbed to a record high in the first three months of 2003 as job losses and personal bankruptcies forced more people out of their homes, a mortgage industry group said on Friday.
Home loans in the process of foreclosure climbed to 1.2 percent of all mortgages in the first quarter, beating the previous high of 1.18 percent set in the fourth quarter of 2002, the Mortgage Bankers Association of America said.
Mortgages entering the foreclosure process rose in the quarter to 0.37 percent from 0.35 percent in the fourth quarter.
The percentage of all loans for one- to four-unit homes that were delinquent -- at least 30 days overdue -- slipped to 4.52 from 4.53 in the fourth quarter.
The housing market has been a pillar of strength for the sluggish U.S. economy. Ultra-low interest rates have fueled record home sales and an unprecedented mortgage refinancing boom that has freed up billions of dollars in cash for consumers to pay down debt, save or spend.
While benefiting from the lowest borrowing costs in more than four decades, Americans have been straining to meet their mortgage payments and credit card bills.
In fact, the first-quarter increase in foreclosures was driven by the rise in foreclosed home loans owed by homeowners with blemished or "subprime" credit histories, Mortgage Bankers Association chief economist Doug Duncan said in a conference call on its latest loan study.
Until the economy improves and companies hire again, more Americans will default on their debt, economists say, and if defaults gain and the increase in home values slows, this will hamper economic growth.
"It will be more difficult to work out trouble loans," Duncan said.
Economists and the financial markets have been hopeful that the economy will pick up steam in the second half of the year, boosted by money from refinancings, the latest round of tax cuts and an anticipated rate cut by the Federal Reserve.
If economic growth accelerates in the second half, Duncan said the average rate on 30-year mortgages, held by most U.S. homeowners, would rise to 5.5 percent at the end of the year from the current 5 percent.
Duncan expects the Fed to lower short-term rates by a quarter point at its meeting next week.
Foreclosure rates rose in the Northeast, the North Central region and the South, but held steady in the West.
In the first quarter, more homeowners fell behind on their mortgage payments in the South and North Central region, while fewer in the Northeast and West were late on their payments.
Foreclosures and mortgage delinquencies in the Midwest were higher than the national average in the first quarter due to heavy job losses in the manufacturing sector, Duncan said.
Among the 50 states, Indiana posted the highest foreclosure rate, at 0.68 percent, and Mississippi had the highest delinquency rate, at 6.73 percent.
At the other end of the spectrum, New Hampshire had the fewest home loans in foreclosure, at 0.17 percent, and South Dakota had the lowest percentage of homeowners behind on their mortgage payments, at 2.26 percent.
© Copyright 2003 Reuters
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