Late Mortgage Payments Reach High
Late
Mortgage Payments Reach High
Tuesday March
13, 6:19 pm ET
By Jeannine Aversa, AP Economics Writer
WASHINGTON
(AP) -- Late mortgage payments shot up to a 3 1/2-year
high in the final quarter of last year and new
foreclosures surged to record levels as borrowers
with tarnished credit histories had trouble keeping
up with monthly payments.
The Mortgage Bankers
Association, in its quarterly snapshot of the mortgage
market released Tuesday, reported the percentage
of payments that were 30 or more days past due
for all loans tracked jumped to 4.95 percent in
the October-to-December quarter.
That marked a sharp
rise from the third-quarter's delinquency rate
of 4.67 percent and was the worst showing since
the spring of 2003, when the late-payment rate
climbed to 4.97 percent.
The association's survey
covers 43.5 million loans.
The latest snapshot of
the mortgage market stoked Wall Street investors'
worries about troubles facing "subprime" lenders
who make loans to people with poor credit. The
Dow Jones industrials tumbled 242.66 points.
The
percentage of mortgages that started the foreclosure process in
the final quarter of last year rose to 0.54 percent, a record high.
The previous high, 0.50 percent, occurred in the
second quarter of 2002 as the economy was recovering
from the blows of the 2001 recession.
Delinquency
and foreclosure rates were considerably higher
for higher-risk subprime borrowers, especially
those with adjustable-rate mortgages.
Lenders
to subprime borrowers -- people with blemished
credit histories -- have been battered. Rising
interest rates and weak home prices have made
it increasingly difficult for these borrowers
-- especially those with adjustable-rate mortgages
-- to keep up with their payments. Delinquencies
and foreclosures in the subprime mortgage market
are spiking.
The late-payment rate for all subprime
loans jumped to 13.33 percent in the fourth quarter,
up from 12.56 percent in the prior period and
the highest in four years. The delinquency rate
for subprime borrowers with adjustable-rate mortgages
was even higher -- 14.44 percent, also the highest
in four years.
"Unfortunately, it appears delinquency
rates will likely worsen before they improve," said
Gina Martin, economist at Wachovia Corp. Economics
Group.
The rate of all subprime loans starting
the foreclosure process at the end of last year
was 2 percent, the highest in three years. The
percentage of subprime adjustable-rate mortgages
entering foreclosure soared to 2.70 percent,
the second-highest on record.
Doug Duncan, the
mortgage association's chief economist, suggested
that borrowers having difficulties making payments
contact their lenders as soon as possible to
work together on the problem. "It
is in everyone's interest to keep the homeowner
in their home paying their bills on time," he
said.
Mounting concerns about risky mortgages
have been making investors jittery. Those fears
contributed to a worldwide stock meltdown on
Feb. 27, where the Dow Jones industrials suffered
a 416-point plunge.
Worried about defaults on
high-risk mortgages, federal bank regulators
earlier this month called on lenders to use caution
in making subprime loans and strictly evaluate
borrowers' ability to repay them.
New Century
Financial Corp., which was the nation's second-largest
subprime mortgage maker, is scrambling to stay
afloat after all its bank lenders cut off funding
or informed the company of their intent to do
so because of its failure to make payments. The
Irvine, Calif.-based company already has stopped
accepting all new loan applications.
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