The percentage of U.S. homeowners who fell behind on their mortgage payments in the third quarter surged to the highest level in a decade as more people lost their jobs in a shaky economy, a mortgage industry group said Monday.
The mortgage delinquency rate--the percentage of loans with payments overdue at least 30 days--rose to 4.87%, up nearly a full percentage point from a year earlier, the Mortgage Bankers Assn. of America said.
It's the highest level since the 1991 recession, when the delinquency rate hit 5.2%.
Analysts said a surge in high-cost loans to homeowners with blemished credit records--borrowers most likely to feel the impact of an economic slowdown--helped boost third-quarter delinquencies.
Home foreclosures also edged up during the quarter. At the end of the quarter, 1.94% of the Federal Housing Authority loans were in foreclosure, up 0.14 of a percentage point from the second quarter, and 0.70% of all conventional loans were in foreclosure, up 0.02 percentage point.
If delinquencies continue to rise, triggering more foreclosures, lenders could be forced to tighten credit and raise mortgage rates to help cover their risks, said Peter Glassman, an economist at Bank One in Chicago.
Some analysts remained hopeful, however, that the economy will begin to rebound before delinquent borrowers begin to lose their homes.
Currently, about 70% of the delinquent homeowners are only 30 days behind on their mortgages--leaving a 60-day cushion before foreclosure proceedings typically begin.
"A lot of people have racked up late fees, but it hasn't necessarily turned into foreclosures," said Keith Gumbinger, vice president at HSH Associates, a mortgage data provider in Butler, N.J. "It could turn into something more pronounced in the months ahead."
Delinquencies rose in every region nationwide during the quarter, but California recorded the smallest rate of gain, while the Northeast showed the largest.
Phil Colling, an economist at the Mortgage Bankers Assn. of America, said he expects the job outlook to improve in the first quarter of 2002.