ICS Magazine

Foreclosures Hit Record High in 1st Qtr

June 20, 2003
NEW YORK (Reuters) - U.S. mortgages in foreclosure climbed to a record high in the first three months of 2003 as job losses and personal bankruptcies forced more people out of their homes, a mortgage industry group said on Friday.

Home loans in the process of foreclosure climbed to 1.2 percent of all mortgages in the first quarter, beating the previous high of 1.18 percent set in the fourth quarter of 2002, the Mortgage Bankers Association of America said.

Mortgages entering the foreclosure process rose in the quarter to 0.37 percent from 0.35 percent in the fourth quarter.

The percentage of all loans for one- to four-unit homes that were delinquent -- at least 30 days overdue -- slipped to 4.52 percent from 4.53 percent in the fourth quarter.

The housing market has been a pillar of strength for a sluggish U.S. economy. Ultra-low interest rates have fueled record home sales and an unprecedented mortgage refinancing boom that has freed up billions of dollars in cash for consumers to pay down debt, save or spend.

While benefiting from low borrowing costs not seen in more than four decades, Americans have been straining to meet their mortgage payments and credit card bills.

Until the economy improves and companies hire again, more Americans will default on their debt, and if defaults increase, this will hamper economic growth, economists say.

But economists and the financial markets have been hopeful that the economy will pick up steam in the second half of the year, boosted by money from refinancings, the latest round of tax cuts and an anticipated rate cut by the Federal Reserve.

"An improved economy and job market should result in gradually declining delinquency rates," said Mortgage Bankers Association chief economist Doug Duncan in a statement.

Foreclosure rates rose in the Northeast, the North Central region and the South, but held steady in the West.

In the first quarter, more homeowners fell behind on their mortgage payments in the South and North Central region, while fewer in the Northeast and West were late on their payments.