Mortgage Delinquencies Rise to Record as Companies Shed Jobs

Americans fell behind on their mortgages and banks seized homes at a record pace in the fourth quarter as unemployment rose to a 15-year high and real estate values tumbled.

Mortgage delinquencies increased to a seasonally adjusted 7.88 percent of all loans, the highest in records going back to 1972, the Mortgage Bankers Association said today. Loans in foreclosure rose to 3.30 percent, also an all-time high.

The U.S. real estate market lost $2.4 trillion in value last year, according to First American CoreLogic, and unemployment jumped to 6.9 percent in the fourth quarter, the most since 1993. As the recession enters a second year, unemployment is becoming a major cause of delinquencies, said Jay Brinkmann, the Washington- based trade group’s chief economist.

“When it’s a loan structure issue, you can deal with that, but when it’s an unemployment issue, unless you go out and find them a job there’s not much you can do,” Brinkmann said in an interview. “Eventually that loan will go into foreclosure.”

The combined percentage of loans in foreclosure and at least one past due was 11.18 percent, the highest ever recorded by the Mortgage Bankers. The percentage of loans 60 days past due and 90 days or more past due all broke records set last quarter.

Enticing Lenders

The median U.S. home price plummeted 12 percent in the fourth quarter from a year earlier, with almost half the transactions foreclosures, according to the National Association of Realtors.

President Barack Obama introduced a plan to use $75 billion of public funds to entice lenders to modify or refinance home loans stem foreclosures and rescue delinquent homeowners. Obama also said the Treasury Department will double its stock purchases of Fannie Mae and Freddie Mac to as much as $200 billion to expand the availability of mortgages.

To qualify for a refinanced loan applicants will have to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to documents released by the U.S. Treasury in Washington yesterday.

More than 8.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion in 2008, First American CoreLogic said in a report yesterday. An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent, according to First American, a Santa Ana, California-based seller of mortgage and economic data.