National foreclosure rate highest in 3 decades

Driven by homeowners in Florida and California, the national home delinquency rate set a new record in the second quarter of this year by coming in at 6.41 percent of all mortgage loans.

Foreclosures have tripled since the housing boom ended in 2005 and now represent 2.75 percent of home mortgages.

The Mortgage Bankers Association, which collects the stats, defines delinquencies as loans on which payments are at least one month overdue. (But which haven't entered the foreclosure process yet). So it's sort of a preview of upcoming foreclosures, though many people will straighten out their troubles before their cases goes to court.

More details from a Bloomberg story here. For a more technical read, here's a direct link to the mortgage bankers.

Comments

[Tino]

As a treasurer of several condo associations, I see the trends of delinquencies even before the banks do. [People will pay their mortgage before condo fees.]

About 12-18 months ago, I noticed a very disturbing trend forming. Traditionally, we would send a letter, then have the attorney take over, filing a lien and then moving to foreclose. In about 50 attorney actions in the previous five years, all 50 were resolved with the owner paying their fees, interest and attorney expenses in full.

At about the start of 2007, the percentage of owners that paid up started to drop as they abandoned their units. Today, no account that is more than 3 months delinquent has paid -- all are going to foreclosure and will sit vacant until the bank dumps them at a fire sale.

I am not sure how people can stick their neck out and call a bottom to the market when these foreclosures are escalating dramatically. Since the total process to throw out a deadbeat takes at least a year, we will be seeing a dramatic number of units (yep, "hidden inventory" that realtors do not even believe exists) being put onto the market well into late 2009 and 2010.

The existing owners should be bracing themselves for a hefty special assessment.

[tina]

Did you mean that, in the past, you have been treasurer of condo associations? Or did you mean that, at this current time, you are treasurer of several condo associations? I'm just curious. Thanks :)

[Fuzzy Bear]

Tino:

I have also served as a treasurer for a large subdivision. I saw the same trends, but many were resolved when the property was sold.

We are not at the bottom and we still have a ways to go before we reach bottom. All one needs to do is research the number of foreclosures, banking woes, failures of Freddie and Fannie and the rest of the macroeconomic indicators to get a clear picture as to where we are headed.

It took years for the housing bubble to form and it will take years for this mess to resolve. Housing prices are coming back to affordable levels and that is the good news!

[Fuzzy Bear]

Good article on the housing bottom, etc.

http://seekingalpha.com/article/94110-housing-prices-bottom-or-temporary-bear-break?source=patrick.net

[Tino]

Past and present.

Condo owners (in Hillsborough) can track this activity by searching on the name of their association in the county records.

http://www.hillsclerk.com/publicweb/search_official_records.aspx

[John Beck]

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Fuzzy, sales price does not mean that much. Affordability in this state has more to do with taxes and insurance.

we need an income tax to replace realestate tax since the latter has no bounds relative to income.

[Tino]

Never.

I can see the "wealth envy class" wailing and gnashing their teeth when wealthy retirees put their investments into municipal bonds while the property tax on a $1 million waterfront home goes from $25,000 a year to zero.

While I would love to be in this position some day, it will never happen. Instead, we would probably get an income tax AND a property tax.