As the pace of unemployment continued, foreclosed homes for sale and delinquency rates increased in the second quarter, based on a report released by the Mortgage Bankers Association.
The default rate for American residential mortgages in the second quarter rose to 9.24 percent of all mortgages, representing over 4 million of 45 million homeowners monitored by MBA.
Compared to the first quarter, the 9.24 percent represented a slight increase, but compared to the second quarter of 2008, it represented a jump of 44 percent.
Meanwhile, the percentage of home loans that have gone into foreclosure rose to 4.3 percent, marking a 3.85 percent increase from the first quarter and a 1.55-percentage point rise from the second quarter of 2008.
During the second quarter, the overall rate for loans in default and loans already in foreclosure reached 13.16 percent, the highest percentage reported ever since MBA started monitoring loan defaults.
According to MBA economist Jay Brinkmann, prime loans had the biggest foreclosure rate increase among types of loans in the second quarter. Foreclosure rates for subprime adjustable rate mortgage loans have subsided.
Almost one out of every 3 foreclosure filings involved a prime mortgage loan, a significant increase from the one-in-five ratio for prime loans in the second quarter of 2008.
This finding on prime loans is becoming a big concern in the mortgage industry as prime home loans comprise 67 percent of the residential mortgage market. If defaults continue to rise among prime loan borrowers, foreclosures will increase sharply.
The four states that have always been on top of foreclosure charts since the start of the housing meltdown still led other states in delinquency rates during the second quarter. Florida, California, Nevada and Arizona accounted for 44 percent of all foreclosure filings in the second quarter.
The main reasons for the continued defaults were economic difficulties and falling home prices.
In Florida, 12 percent of all mortgages were in some stage of foreclosure, the highest rate in the second quarter. Another 5 percent were delinquent by at least 3 months as of June 30.
On the whole, according to economist Brinkmann, loan defaults and foreclosures will continue to rise if the employment situation does not significantly improve. He said that job losses and the resulting mortgage defaults will reach their peaks in the middle of next year, followed by foreclosures several months after.
