Mortgage Delinquencies and Foreclosures Up Big in Q2

Foreclosure starts set an all-time record as mortgage delinquency rates increased in the second quarter of 2007, according to data released yesterday by the Mortgage Bankers Association.

From April 1 to the end of June, 0.65 percent of all outstanding home loans in the country entered the foreclosure process, the highest percentage of foreclosure starts since the association started keeping track in 1972. The previous record, 0.58 percent, was set in the first quarter of this year.

The total number of mortgages at some stage in the foreclosure process stood at 1.4 percent in the second quarter, a nine percent increase from the first quarter and a 41 percent increase from the total in the second quarter of 2006.

The percentage of all outstanding home loans that were delinquent in the quarter was 5.12. This is up nearly 6 percent from the first quarter of this year and almost 17 percent from the second quarter of 2006. The MBA categorizes a delinquent home loan as one that is 30 days or more past due.

Because the delinquency numbers exclude loans that are in the process of foreclosure, the two are considered separate measures that can be combined. When added, 6.52 percent of all outstanding home loans were either delinquent or at some stage of the foreclosure process in the second quarter.

But the association said that the news isn’t all bad. Four large or fast-growing states with a disproportionate number of foreclosures — California, Florida, Nevada, and Arizona — are driving national numbers. In fact, “Thirty four states had decreases in their rates of new foreclosure and the increases were very modest in the states with increases, other than those four,” said Doug Duncan, MBA’s chief economist, in a press release.

A new study from the Association of Community Organizations for Reform Now (ACORN), however, indicates more problems on the horizon for homeowners, particularly in the South. ACORN found that problems due to lending to minorities and the poor that are classified as subprime have not been fully realized in many metropolitan areas. Subprime consumers have spotty credit histories.

Of the 10 metropolitan areas found to be at the highest risk for mortgage defaults nationwide, seven were in the South, and data showed that high-cost subprime loans accounted for more than two-fifths of all loans issued in those cities.

ACORN’s report, “Foreclosure Exposure: A Study of Racial and Income Disparities in Home Mortgage Lending in 172 American Cities,” focused exclusively on the demographic and socioeconomic status of borrowers rather than foreclosures and delinquencies.