Home foreclosures won't peak for at least 6 months, economist says
September 7, 2007
BY GRETA GUEST
FREE PRESS BUSINESS WRITER
Mortgage delinquencies and foreclosures nationwide and in Michigan may not peak for another year, according to the chief economist for the Mortgage Brokers Association.
Doug Duncan said Thursday that before the recent credit crunch, he had expected to see a peak and then subsequent drop in loan delinquencies within three to nine months. But the peak likely won't happen for another six to 12 months as the credit crunch brought on by high numbers of defaults, particularly in the subprime market, has meant people can no longer borrow their way out, he said.
The Mortgage Bankers Association released its second-quarter report on Thursday for the 3 months that ended June 30 and found that most of the loan delinquencies and foreclosures were happening in seven states, including Michigan.
"This is a story of seven states. The markets in the other 43 states are doing well and in some cases very well," Duncan said.
Duncan said that in three states -- Michigan, Ohio and Indiana -- the high level of delinquency and foreclosure has to do with the underlying economy. For example, Michigan lost nearly 300,000 jobs between 2001 and April 2007.
"That has led to a decline in house prices" and an increase in foreclosures, he said on a conference call Thursday.
And the four other states driving up the national rates are California, Florida, Nevada and Arizona, he said. These states have high rates of adjustable rate mortgages (ARMs). For example, in Nevada 42% of all outstanding loans are adjustable rate, Duncan said.
"These four states are seeing declining house prices, which makes refinancing these ARMs difficult," Duncan said.
These four states also have a disproportionately high share of investor loans and are more likely to default if they see the value of their investments falling because of dropping home prices.
The national delinquency rate on residential properties was 5.12% of all loans outstanding in the April to June time frame. That's up 28 basis points from the first quarter and up 73 basis points from a year ago (100 basis points equal 1%). Any loan that is 30 days or more past due and not in the foreclosure process is considered delinquent.
Duncan said that 1% of all mortgages in Michigan had foreclosure actions started on them during the second quarter, which is essentially the same rate as during the first quarter of the year.
"While Michigan's problems continue to escalate, however, Ohio's have shown signs of leveling off, albeit at a high level," Duncan said.
Michigan led the nation in foreclosure starts with a rate of 1% of outstanding loans, with Ohio in second place with .98% and Indiana with .91%.
Michigan ranked second in overall delinquency rates with a rate of 7.55%, behind Mississippi with a rate of 9.33%. Louisiana was third with a rate of 7.29%.
And Michigan ranked third in foreclosure inventory with a rate of 2.77%, behind Ohio with 3.60% and Indiana with 3.01%.
The National Delinquency Survey covers more than 80% of outstanding loans in the housing market.
September 7, 2007
BY GRETA GUEST
FREE PRESS BUSINESS WRITER
Mortgage delinquencies and foreclosures nationwide and in Michigan may not peak for another year, according to the chief economist for the Mortgage Brokers Association.
Doug Duncan said Thursday that before the recent credit crunch, he had expected to see a peak and then subsequent drop in loan delinquencies within three to nine months. But the peak likely won't happen for another six to 12 months as the credit crunch brought on by high numbers of defaults, particularly in the subprime market, has meant people can no longer borrow their way out, he said.
The Mortgage Bankers Association released its second-quarter report on Thursday for the 3 months that ended June 30 and found that most of the loan delinquencies and foreclosures were happening in seven states, including Michigan.
"This is a story of seven states. The markets in the other 43 states are doing well and in some cases very well," Duncan said.
Duncan said that in three states -- Michigan, Ohio and Indiana -- the high level of delinquency and foreclosure has to do with the underlying economy. For example, Michigan lost nearly 300,000 jobs between 2001 and April 2007.
"That has led to a decline in house prices" and an increase in foreclosures, he said on a conference call Thursday.
And the four other states driving up the national rates are California, Florida, Nevada and Arizona, he said. These states have high rates of adjustable rate mortgages (ARMs). For example, in Nevada 42% of all outstanding loans are adjustable rate, Duncan said.
"These four states are seeing declining house prices, which makes refinancing these ARMs difficult," Duncan said.
These four states also have a disproportionately high share of investor loans and are more likely to default if they see the value of their investments falling because of dropping home prices.
The national delinquency rate on residential properties was 5.12% of all loans outstanding in the April to June time frame. That's up 28 basis points from the first quarter and up 73 basis points from a year ago (100 basis points equal 1%). Any loan that is 30 days or more past due and not in the foreclosure process is considered delinquent.
Duncan said that 1% of all mortgages in Michigan had foreclosure actions started on them during the second quarter, which is essentially the same rate as during the first quarter of the year.
"While Michigan's problems continue to escalate, however, Ohio's have shown signs of leveling off, albeit at a high level," Duncan said.
Michigan led the nation in foreclosure starts with a rate of 1% of outstanding loans, with Ohio in second place with .98% and Indiana with .91%.
Michigan ranked second in overall delinquency rates with a rate of 7.55%, behind Mississippi with a rate of 9.33%. Louisiana was third with a rate of 7.29%.
And Michigan ranked third in foreclosure inventory with a rate of 2.77%, behind Ohio with 3.60% and Indiana with 3.01%.
The National Delinquency Survey covers more than 80% of outstanding loans in the housing market.
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