11% of mortgages are troubled

More than 11% of all American homeowners who hold a mortgage are either delinquent or in foreclosure, according to an industry report released Thursday.

The percentage of mortgage borrowers at least one month behind in their payments - but not in foreclosure - rose to nearly 8% during the fourth quarter of 2008, according to the National Delinquency Report from the Mortgage Brokers Association (MBA). That is the highest rate of delinquency ever recorded by the survey, which began in 1972, and reflects a record 13% jump compared to the third quarter.

"Subprime ARM loans and prime ARM loans, which include Alt-A and pay-option ARMs, continue to dominate the delinquency numbers," Jay Brinkman, chief economist for the MBA, said in a prepared statement. "Nationwide, 48% of subprime ARMs were at least one payment past due, and in Florida over 60% of subprime ARMs were at least one payment past due."

The number of homes in the foreclosure process rose to 3.3%, an increase of 0.33 percentage points from the quarter before and up 1.26 percentage points from a year earlier. That represents nearly 1.5 million homes at risk of sliding all the way through foreclosure.

Combined, the number of frequencies and loans in foreclosure came to 11.18%, the highest ever recorded by the MBA.
Delaying tactics

And even though the number of loans entering into the foreclosure process remained steady, the number of loans stuck there was particularly high, according to Brinkman.

"This is mainly attributable to various state and local moratoria on foreclosure sales, the Fannie Mae and Freddie Mac halt on foreclosure sales announced in late November, a general reluctance by servicers to proceed with evictions in the last few weeks of December and a slowing down caused by an overburdened legal process in some areas," he said.

Because of the moratoria, the number of loans very far past due, 90 days or more, jumped sharply to 3% from 2.2% a quarter earlier. In the past, many of those loans would have been cleared out of the system by lenders completing the foreclosure process.

Even though delinquencies are still driven by problems with non-traditional mortgage loans, Brinkman said more fundamental, historic causes of foreclosure are also making an impact.

"The delinquency rates continue to climb across the board for prime fixed-rate and subprime fixed-rate loans - loans whose performance is driven by the loss of jobs or income rather than changes in payments," he said.

Five states - California, Nevada, Arizona, Florida and Michigan - once again dominated delinquency statistics during the quarter, but the number of loans 90 days late or more also increased significantly in New York, Louisiana, Texas, Georgia and Mississippi.