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Late Mortgage Payments Reach High
By JEANNINE AVERSA
AP Economics Writer
WASHINGTON (AP) -- Late mortgage payments shot up to
a 3 1/2-year high in the final quarter of last year and
new foreclosures surged to record levels as borrowers
with tarnished credit histories had trouble keeping up
with monthly payments.
The Mortgage Bankers Association, in its quarterly snapshot
of the mortgage market released Tuesday, reported the
percentage of payments that were 30 or more days past
due for all loans tracked jumped to 4.95 percent in the
October-to-December quarter.
That marked a sharp rise from the third-quarter's delinquency
rate of 4.67 percent and was the worst showing since
the spring of 2003, when the late-payment rate climbed
to 4.97 percent.
The association's survey covers 43.5 million loans.
The latest snapshot of the mortgage market stoked Wall
Street investors' worries about troubles facing "subprime" lenders
who make loans to people with poor credit. The Dow Jones
industrials tumbled 242.66 points.
The percentage of mortgages that started the foreclosure
process in the final quarter of last year rose to 0.54
percent, a record high. The previous high, 0.50 percent,
occurred in the second quarter of 2002 as the economy
was recovering from the blows of the 2001 recession.
Delinquency and foreclosure rates were considerably
higher for higher-risk subprime borrowers, especially
those with adjustable-rate mortgages.
Lenders to subprime borrowers - people with blemished
credit histories - have been battered. Rising interest
rates and weak home prices have made it increasingly
difficult for these borrowers - especially those with
adjustable-rate mortgages - to keep up with their payments.
Delinquencies and foreclosures in the subprime mortgage
market are spiking.
The late-payment rate for all subprime loans jumped
to 13.33 percent in the fourth quarter, up from 12.56
percent in the prior period and the highest in four years.
The delinquency rate for subprime borrowers with adjustable-rate
mortgages was even higher - 14.44 percent, also the highest
in four years.
"Unfortunately, it appears delinquency rates will
likely worsen before they improve," said Gina Martin,
economist at Wachovia Corp. Economics Group.
The rate of all subprime loans starting the foreclosure
process at the end of last year was 2 percent, the highest
in three years. The percentage of subprime adjustable-rate
mortgages entering foreclosure soared to 2.70 percent,
the second-highest on record.
Doug Duncan, the mortgage association's chief economist,
suggested that borrowers having difficulties making payments
contact their lenders as soon as possible to work together
on the problem. "It is in everyone's interest to
keep the homeowner in their home paying their bills on
time," he said.
Mounting concerns about risky mortgages have been making
investors jittery. Those fears contributed to a worldwide
stock meltdown on Feb. 27, where the Dow Jones industrials
suffered a 416-point plunge.
Worried about defaults on high-risk mortgages, federal
bank regulators earlier this month called on lenders
to use caution in making subprime loans and strictly
evaluate borrowers' ability to repay them.
New Century Financial Corp., which was the nation's
second-largest subprime mortgage maker, is scrambling
to stay afloat after all its bank lenders cut off funding
or informed the company of their intent to do so because
of its failure to make payments. The Irvine, Calif.-based
company already has stopped accepting all new loan applications.
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