Despite Interest Rate Cuts, Foreclosures Hit Record High

Washington Post (06/06/08) P. D1; Merle, Renae
The Mortgage Bankers Association reports a jump in the foreclosure rate to 2.47 percent in the 2008 first quarter from 1.28 percent during the same three months of 2007 and a surge in the delinquency rate to 6.35 percent from 4.84 percent over the same period. Adjustable-rate mortgages account for more than 60 percent of foreclosures, despite the fact that interest-rate cuts by the Federal Reserve lessened the payment shock from rate resets; many of the loans soured even before their borrowing costs were adjusted. MBA notes that foreclosures on prime loans rose faster than subprime loans during the first three months of the year--which analysts attribute to soaring gas and food prices as well as rising unemployment and falling home prices, coupled with modest increases in monthly payments. The highest foreclosure rates of 9.24 percent and 8.25 percent were recorded in California and Florida, respectively, with Jay Brinkmann, MBA vice president for research and economics, stating that "things in California and Florida are going to get worse before they get better."