Loan Defaults

Carlyle Capital Corp., a highly leveraged affiliate of buyout giant Carlyle Group, defaulted on $16.6 billion of debt and expects lenders to seize its portfolio of mortgage-backed bonds, Carlyle Group said Thursday. Formed last summer as the credit crunch was taking hold, Carlyle Capital invested in highly rated securities issued by Fannie Mae and Freddie Mac. As the credit crisis intensified in recent weeks, even those relatively safe holdings lost market value, prompting the fund's Wall Street lenders to demand more collateral.

Defaults on privately insured U.S. mortgages rose 38.1% in February, as a growing number of homeowners failed to keep up with their loan payments. The Mortgage Insurance Cos. of America, a trade group, said Monday that 60,911 insured borrowers were at least 60 days late on payments in February. That is up from 44,111 a year earlier, but down 11.7% from January's record 68,950.

More Americans have fallen behind on consumer loans than at any time in nearly 16 years as credit problems once concentrated in mortgages spread into other forms of debt. In a quarterly study, the American Bankers Assn. said the percentage of loans at least 30 days past due rose to 2.65% in the fourth quarter from 2.44% in the third quarter and from 2.23% a year earlier. The rate of delinquencies was the highest since a 2.75% rate in the first quarter of 1992.

With the Senate poised to take new action on the mortgage crisis and the House at work on far more sweeping proposals, the Bush White House is grudgingly giving ground on its ideological opposition to government intervention in the marketplace. After months of reluctance to pressure lenders to write down the principal on troubled mortgages, the administration announced Wednesday that it is now willing to do just that.

Newly delinquent borrowers with privately insured mortgages outnumbered people who caught up on their overdue payments by almost 2 to 1 last month, a sign that nationwide efforts to help homeowners avoid default may be failing. In April, 73,880 homeowners with privately insured mortgages fell more than 60 days late on payments, compared with 39,584 who got back on track, the Mortgage Insurance Cos. of America said.

Fresh concerns about the troubled housing and mortgage markets were triggered Thursday by speculation that the government would be forced to bail out Fannie Mae and Freddie Mac, the twin pillars of the home loan industry. Analysts worry that the mortgage giants won't be able to raise enough money from investors to cover rising losses from loan defaults. Those doubts have ramped up a sell-off by investors, sending shares of both companies to 17-year lows.

Mortgage troubles continue to bedevil Ed McMahon, the former sidekick to Johnny Carson on "The Tonight Show," who has been battling to fend off foreclosure of his Beverly Hills home. A Huntington Beach lender has sued McMahon to recover a $250,000 loan it said McMahon had failed to pay back, along with interest and legal costs. McMahon secured the loan with his house. In July, he was sued by his former lawyers for $275,167 over payment of a legal bill.

Shares of OfficeMax Inc. plunged the most in almost 21 years Friday after the office supplies retailer said debt that was partially guaranteed by Lehman Bros. Holdings Inc. was in default. OfficeMax shares fell $2.12, or 16%, to $11.11, the biggest one-day decline since October 1987. OfficeMax issued $1.47 billion in notes in 2004 in a transaction designed to defer taxes on the sale of timberlands, Christopher Horvers, an analyst at JPMorgan Securities Inc. in New York, said in a research note.

The U.S. government and New York Atty. Gen. Andrew Cuomo have opened a joint investigation into the $34.8-trillion credit-default swap market, the top federal prosecutor in New York said Monday. The probe seeks to "determine whether any federal laws have been violated" in the market for the swaps, which function as a kind of insurance contract for bond losses. The action will complement an earlier inquiry by Cuomo's office, U.S. Atty. Michael Garcia in Manhattan said.

A major Texas developer confirmed Monday that it took possession of 53 Southern California office buildings last week in a transaction valued at almost $1.4 billion after the previous owners were unable keep up their loan payments. Privately held Hines recently said it controlled international real estate valued at $23 billion that included several properties in California, such as office buildings One Wilshire and Union Bank Plaza in downtown Los Angeles.