US MORTGAGE FORECLOSURES SOAR

By Saskia Scholtes in New York
More than one in eight US mortgage borrowers was behind on their payments or facing foreclosure at the end of the second quarter, as rising unemployment aggravated the housing crisis, the Mortgage Bankers Association said yesterday.
The percentage of loans in foreclosure or with at least one payment past due rose to 13.16 per cent, the highest since the MBA began records in 1972 and a jump of more than a percentage point since the first quarter.
Jay Brinkmann, chief economist at the MBA, said signs were growing that mortgage performance was being affected more by unemployment than by risky underwriting, indicating a new stage in the foreclosure crisis that may not be easily addressed by government loan modification programmes.
“There has been a shift in the problem from one driven by the types of loans to one driven by macro problems in the economy and drops in house prices,” said Mr Brinkmann. “It's unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves.”
He expected the peak in foreclosures to lag behind the jobless peak by about six months.
The growing importance of unemployment in the mortgage crisis was illustrated by the increase in foreclosure starts on traditional prime fixed-rate loans. Prime fixed-rate loans accounted for one in three foreclosure starts at the end of the second quarter. A year ago they accounted for one in five. By contrast, foreclosures started on borrowers with subprime adjustable-rate mortgages fell dramatically in the second quarter.
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