Posted on: Tuesday, September 10, 2002

Mortgage defaults at historic high

Bloomberg News Service

WASHINGTON — The foreclosure rate on U.S. home loans rose to the highest level since records have been kept in the second quarter, as more Americans lost their jobs.

The rate at which loans went into foreclosure rose to 0.40 percent of all mortgages, from .37 percent the previous quarter, said the Mortgage Bankers Association of America, which has tracked the rate since 1953.

The delinquency rate, or portion of all mortgages at least 30 days past due, rose to 4.77 percent, the highest since the 4.87 percent rate in the last year's third quarter and the second highest since 1991.

Rising unemployment offset the effects of falling mortgage costs, because homeowners who lost their jobs weren't able to refinance their loans and lower their payments. Unemployment averaged 5.9 percent in the second quarter, up from 5.6 in the previous quarter and 4.5 percent a year earlier, said Doug Duncan, chief economist for the Washington-based trade group.

"We have emerged from the recession but only weakly," he said. "We have yet to see a turnaround in unemployment, critical to the recovery of delinquencies."

Rates for a 30-year fixed mortgage averaged 6.81 percent in the second quarter, compared with 7.13 percent a year earlier and 8.32 percent two years earlier, according to Freddie Mac, a key buyer of U.S. mortgages.