Home foreclosures soared to an all-time high in the final quarter of 2007 and Americans’ percentage of equity in their homes has fallen below 50 percent for the first time since 1945, according to two reports released Thursday that add to the evidence of a housing meltdown.
The Mortgage Bankers Association, in a quarterly snapshot of the mortgage market, said the proportion of all mortgages nationwide that fell into foreclosure shot up to a record high of 0.83 percent in the October-to-December quarter.
That surpassed the previous high of 0.78 percent, set in the third quarter of last year.
“Clearly, it’s the worst it’s been,” said Douglas Duncan, the association’s chief economist.
In the second report, the Federal Reserve’s U.S. flow of funds accounts shows that homeowners’ percentage of home equity slipped to a revised 49.6 percent in the second quarter of 2007 and declined further to 47.9 percent in the fourth quarter.
The banking group’s report also said the delinquency rate for all mortgages climbed to 5.82 percent in the fourth quarter, up from 5.59 percent in the third quarter and the highest level since 1985.
Payments are considered delinquent if they are 30 or more days past due.
Homeowners with tarnished credit who have subprime adjustable-rate loans were the hardest hit. The percentage of subprime ARMs that entered the foreclosure process surged to a record 5.29 percent from 4.72 percent in the third quarter, which had marked the previous high. Late payments climbed to a record 20.02 percent in the fourth quarter, up from the previous high of 18.81 percent in the third quarter.
Initially low interest rates that reset to much higher rates have clobbered borrowers who took out higher-risk subprime ARMs. With home values dragged down by the slump, many were left with mortgages that eclipsed the value of their homes.
“Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state,” Duncan said.
California and Florida accounted for 30 percent of mortgages starting the foreclosure process, the association said.
“In states like California, Florida, Nevada and Arizona, overbuilding of new homes created a surplus that will take some time to work through,” Duncan said.
