Foreclosures rise 68% in a year

November tally bodes ill for '08 when rates reset

There were 201,950 foreclosure filings in November, including default notices, auction letters, and bank repossessions. (Erin Siegal/Reuters/file 2007)

SAN FRANCISCO - US home foreclosures rose 68 percent in November from a year earlier and may surge in 2008 as adjustable-rate mortgages leave subprime borrowers unable to meet higher payments, according to data compiled by RealtyTrac Inc.

There were 201,950 foreclosure filings in November, including default notices, auction letters, and bank repossessions, down 10 percent from October's total, RealtyTrac reported yesterday. California, Florida, and Ohio had the most filings and Nevada had the highest foreclosure rate.

Interest rates increased on more than $87 billion of subprime mortgages in the third quarter, and another $84 billion will reset in the fourth quarter, according to New York-based analysts for Credit Suisse Group. Falling home prices have made it difficult for borrowers to refinance into better loans, said Paul Willen, an economist at the Federal Reserve Bank of Boston.

"We think the housing situation will get worse before it gets better," Willen said. "The real driving force here is home prices. How long it lasts depends a lot on how long it takes for prices to appreciate again."

Foreclosures probably will surge next year as payments rise on about 1 million home loans, said Rick Sharga, executive vice president for marketing at RealtyTrac, an Irvine, Calif.-based seller of foreclosure information with a database of more than 1 million properties.

"I wouldn't be surprised if we're at the 230,000 to 250,000 level" for monthly foreclosures in the first quarter, Sharga said.

Mortgage applications in the United States fell last week by the most since 2004 as a jump in interest rates caused purchases and refinancing to decline, according to a Mortgage Bankers Association report issued today.

Their index fell 20 percent to 653.8, from 881.8 the prior week. The group's purchase index fell 11 percent, and its refinancing gauge plunged 27 percent.

Foreclosed properties are adding to the supply of unsold homes and deepening the US housing recession. Existing home sales will fall 12 percent, and home prices will drop 4.5 percent next year, according to Fannie Mae, the biggest US mortgage buyer. The inventory of unsold houses is at 11 months' worth, an eight-year high.

Falling prices mean some homeowners owe more on their mortgages than the properties are worth, said Jan Hatzius, chief economist for Goldman Sachs Group Inc.

"House prices rose too far," Hatzius said. "You've got a large amount of supply and that's pushing people into negative equity."

California, the most expensive real estate market, had five cities whose foreclosure rates were in the US top 10, RealtyTrac said.

Nevada's foreclosure rate, the highest of any state, was more than four times the national rate, at one filing for every 152 households, followed by Florida, with one filing for every 282 households, and Ohio, with one for every 307 households.