Foreclosure levels reach record high
Report cites woes of borrowers with subprime loans
LOS ANGELES -- The number of Americans who may lose their homes because of late mortgage payments rose to a record in the first quarter, led by subprime borrowers pinched in an economy that grew at the slowest pace in four years.
The share of all mortgages entering foreclosure rose to 0.58 percent from 0.54 percent in the fourth quarter, the Mortgage Bankers Association said in a report yesterday. Subprime loans entering foreclosure rose to a five-year high of 2.43 percent, up from 2 percent, and prime loans rose to a record 0.25 percent.
The median home price probably will fall this year for the first time since the Great Depression in the 1930s, according to Lawrence Yun, a National Association of Realtors economist. Tumbling prices make it difficult for people who fall behind on payments to avoid foreclosure by selling, said Doug Duncan, chief economist for the mortgage bankers.
"Housing is in a recession, and we're seeing that reflected in prices," Duncan said "If you're in a position where you can refinance or sell, but house prices have fallen below your outstanding loan balance, you're in trouble."
The economy grew at a 1.9 percent pace in the first quarter, compared with a year ago, the smallest gain since 1.8 percent in the second quarter of 2003. Measured annually, the housing slump will help cool 2007's economic growth to the slowest pace in five years, said Frank Nothaft, chief economist of Freddie Mac, the world's number two mortgage buyer.
Ohio had the biggest share of all loans entering foreclosure, at 1.07 percent, followed by Indiana, at 1.04, and Michigan, at 1.01.
The percentage of total homes in foreclosure, the so-called inventory, also rose for both categories, with subprime loans climbing to 5.10 percent from 4.53, and the prime share rising to 0.54 percent from 0.50. The survey goes back to 1972, Duncan said.
Living in an area with multiple foreclosures can result in a 10 to 20 percent decrease in property values, said John Kilpatrick, president of Greenfield Advisors, a Seattle real estate consultant. In some cases that can wipe out the equity of homeowners or leave them owing more on their mortgage than the house is worth.
