Mortgage Foreclosures in U.S. Rise at Fastest Pace in Almost Three Decades

U.S. Mortgage Foreclosures, Delinquencies Rise to 29-Year Highs

By Kathleen M. Howley

Sept. 5 (Bloomberg) -- Foreclosures accelerated in the second quarter to the fastest pace in almost three decades as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are depriving owners with adjustable- rate loans of the ability to sell or get a new loan as financing costs rise, said Jay Brinkmann, MBA's chief economist. Subprime ARMs accounted for 36 percent of new foreclosures and prime ARMs, held by the most creditworthy borrowers, were 23 percent, he said.

``People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can't sell and they can't afford the higher payments,'' Brinkmann said in an interview.

The three-year-old housing slump has slowed growth of the world's largest economy, caused more than half a trillion dollars of losses at banks such as Citigroup Inc. and UBS AG, and crimped earnings for companies such as Home Depot Inc. and Lowe's Cos. that rely on home purchases to fuel demand. ........(more)

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