Foreclosures in U.S. hit record highs

Delaware levels below national average for now; peak in sheriff's sales expected in late 2008
By LESLIE A. PAPPAS, The News Journal

Posted Friday, March 7, 2008
Foreclosures nationwide have reached record levels and the number of mortgage holders behind on payments is at its highest since 1985, a mortgage industry survey revealed Thursday.

Delaware rates remain below the national average, but foreclosures and delinquencies in the First State are expected to follow the nation's upward slope as housing prices fall, banks tighten up on lending, investors shy away from buying mortgage-backed securities, and struggling homeowners find themselves unable to refinance or sell their homes.

"All of these things work together to produce a downward spiral, there's no question," Doug Duncan, chief economist for the Mortgage Bankers Association, said in a conference call Thursday to discuss the group's Fourth Quarter 2007 National Delinquency Survey. "We don't expect to see the peak in delinquencies and foreclosures until the middle to late 2008."

Nationwide, a record 2.04 percent of mortgage holders -- more than 938,000 people, based on seasonally unadjusted figures -- had fallen into foreclosure at the end of 2007, up from 1.69 percent -- or about 767,500 people -- at the end of the third quarter last year.

About 2.9 million people nationwide were at least 30 days past due on their mortgage payments at the end of December, up from about 2.6 million people in the third quarter.

More than 10,000 of those making late payments are in Delaware, where 5.66 percent of borrowers had fallen at least 30 days behind on their mortgage payments.

About 3,307 mortgages, or 1.85 percent of the state's 178,768 loans, were in some state of foreclosure at the end of the fourth quarter, up from 2,510 mortgages, or 1.38 percent of a total of 181,895 loans, at the end of the third quarter.

Mortgage holders with prime loans are beginning to stumble, as well.

Gerry Kelly, Delaware's deputy bank commissioner for consumer affairs, said he is growing concerned not only about homeowners with adjustable-rate subprime mortgages but also people holding prime Alt-A mortgages and so-called Option ARMs, who might see their mortgages balloon unexpectedly.

Subprime loans were made to people with poor credit histories. So-called Alt-A mortgages were given to people with minor credit problems or who lacked full documentation.

"I would say that we're expecting foreclosure filings to peak sometime this spring and sheriff's sales late this year," Kelly said. "But a lot is driven by jobs and the economy ... it all depends."

The peak of the foreclosure problem is expected later this year because a number of adjustable-rate mortgages from 2003 and 2005 will reset -- and go higher, said Sandy Johnson, director of the Delaware State Housing Authority and a member of the state's foreclosure task force.

"The residual is going to last through probably '09," she said. The task force is making efforts to stem foreclosures "at a minimum through 2010," Johnson said. "That's when there may be some sigh of relief."

In a separate report, Americans' percentage of equity in their homes has fallen below 50 percent for the first time on record since 1945, the Federal Reserve said.

Homeowners' percentage of equity slipped to 49.6 percent in the second quarter of 2007 and 47.9 percent in the fourth quarter, the first time homeowners' debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

A lot of that equity loss is due to falling prices and owners who tapped into their equity through refinancing.