The Future of Real Estate

Trends in Real Estate Industry and How They Affect Our Lives

By AMY HOAK

More Americans struggled to pay their mortgage bills in the fourth quarter of 2008. A record 5.4 million U.S. homeowners with a mortgage, or nearly 12%, were either behind on payments or in foreclosure at the end of last year, according to an industry survey.

The Mortgage Bankers Association said Thursday the percentage of loans at least a month overdue or in foreclosure was up from 10% in the July-September quarter and up from about 8% a year earlier.

The sharpest increases in loans 90-days past due were in Louisiana, New York, Georgia, Texas and Mississippi, reflecting a spreading recession and massive job losses nationwide.

The report also showed the delinquency rates for fixed-rate mortgages climbed in the fourth quarter, another sign that layoffs are taking a toll on homeowners.

The percentage of loans at least 30 days past due rose to a record 7.88%, up from 6.99% in the third quarter and 5.82% a year earlier -- the biggest quarterly jump for delinquencies since the survey began in 1972.

The rate of mortgages entering the foreclosure process, however, inched up to 1.08%, which matched a record, from 1.07% of all mortgages that started the process in the third quarter. In fact, foreclosure starts have remained essentially flat for the last three quarters of 2008, said Jay Brinkmann, the MBA's chief economist and senior vice president for research and economics, in a news release.

That's happening for a variety of reasons. "Normally servicers would have initiated foreclosure actions on a significant portion of these loans but delayed doing so for a variety of reasons, including working on loan modifications, complying with the guidelines of different investors, and various delays in different locales," he said.

Some servicers are also reporting borrowers who are "running their accounts 90 days delinquent" so that they can qualify for certain loan modifications, Mr. Brinkmann added.

The percentage of loans somewhere in the foreclosure process was 3.30% in the fourth quarter, up from 2.97% in the third quarter, according to the survey.

The recession began having a larger impact on delinquency numbers late last year, as more people lost their jobs and couldn't keep up with payments. That was somewhat of a shift from the factors that fueled the initial uptick in foreclosures, Mr. Brinkmann said.

"The delinquency rates continue to climb across the board for prime fixed-rate and subprime fixed-rate loans, loans whose performance is driven by the loss of jobs or income rather than changes in payments," he said.

Mr. Brinkmann expects a continued shift from delinquencies due to the structure and underwriting quality of loans to delinquencies caused by job and income losses.