US foreclosures more than double
Updated: 2007-09-19 07:37
The number of Americans who may lose their homes to foreclosure more than doubled in August from a year earlier as subprime borrowers with adjustable-rate mortgages saw their monthly payments rise, RealtyTrac Inc said.
Lenders sent notices of default or the equivalent to 108,716 homeowners in August, up from 42,144 in August 2006, RealtyTrac said yesterday. It was the highest recorded in a study that goes back to 2005. California led with 41,714 notices and Florida was second with 26,203.
The US economy may stumble as the two-year housing decline worsens amid the surge in foreclosures and the collapse of more than 100 mortgage companies.
"This is just the beginning of a wave of new foreclosures," Rick Sharga, executive vice-president of marketing for RealtyTrac in Irvine, California, said in an interview. "There are lots of people who bought homes they could only afford at the teaser rates, and now have very few options."
Subprime loans, given to borrowers with limited or tarnished credit histories, often have so-called teaser rates that can double at the end of two or three years, he said.
The foreclosure process typically begins when a borrower is more than 90 days late on mortgage payments and the lender files a notice of default. If the borrower doesn't pay what's owed, the property goes to auction. If bids don't reach that amount, the lender takes ownership of the house.
Adjustable-rate mortgages to subprime borrowers account for 7.3 percent of all home loans and 44 percent of all new foreclosures, according to Mortgage Bankers Association in Washington. The 15 percent of all mortgages that are prime adjustable-rate loans - granted to borrowers with good credit histories - represent 15 percent of new foreclosures, the bankers' group said on September 6.
The total number of US foreclosure filings, including defaults, scheduled auctions and bank repossessions, rose 115 percent to a record 243,947 in August from a year earlier, RealtyTrac said in its report. The total foreclosure filing number can double- or triple-count homes in default if they have more than one legal filing against them in a month.
Nevada, California
Nevada had the highest US rate, with one foreclosure filing for every 165 homes, three times worse than the national average of one for every 510 properties.
California was No 2 with one filing per 224 households and Florida had the third-highest rate.
US banks reported owning residential property valued at $4.24 billion in the second quarter, typically houses and condominiums seized in foreclosures, according to the Federal Deposit Insurance Corp. That's up from $2.29 billion a year earlier.
About 14 percent of domestic banks have raised standards for mortgages to their best-rated customers and 56 percent have made it more difficult for subprime borrowers to get loans, according to a Federal Reserve survey of senior loan officers in mid-July.
Defaults on subprime mortgages will continue driving up foreclosures through 2009, Sharga said, citing pending interest hikes on adjustable-rate loans homeowners took out in 2005 and 2006.
Bloomberg News
(China Daily 09/19/2007 page15)
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