WASHINGTON — A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.
Driven by rising unemployment, such loans accounted for nearly one-third of new foreclosures last quarter. That compares with 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.
At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record high for the ninth straight quarter, rising to 9.64 percent.
In Texas, the delinquency rate at the end of the third quarter was 9.84 percent, the Mortgage Bankers Association said Thursday. Nearly 2 percent of those loans were in foreclosure by the end of September, compared with 4.5 percent nationally.
Foreclosures in Dallas-Fort Worth rose 23 percent this year, to a record 61,676 filings.
The Mortgage Bankers Association's report suggested that the housing market and the broader recovery are under pressure from the surge in home-loan defaults, especially as unemployment keeps rising. Lost jobs are now the main reason that homeowners fall behind on mortgages. By contrast, during the housing boom, dubious and risky loans were the leading cause.
After three years of plunging prices, the housing market started to rebound this summer. But analysts say too many foreclosed properties have yet to be dumped on the market.
About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if a quarter of those borrowers can stay in their homes, "there's a lot of potential inventory coming into the market next year," said Jay Brinkmann, chief economist with the Mortgage Bankers Association.
Those foreclosures will push home prices downward, especially in the hardest-hit California and Florida cities with soaring unemployment, Brinkman said.
Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures, down from 35 percent a year ago.
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This is more evidence that our economic outlook is poor. People continue to lose jobs. Others continue to work under-employed, and part time.
ReplyDeleteYet the media (propaganda machine of the government) continues to tell us the recession is over.
It is only over for the rich elites who invest on Wall Street. As soon as regular people feel tempted to invest their retirement savings back into the stock market these bastards will cause another crash.
It is called transfer of wealth.