Falling Behind
The number of homeowners falling behind on their mortgage payments rose during the third quarter, with the sharpest increase among high-risk borrowers who qualify only for high-interest-rate loans. A survey found that 4.67 percent of homeowners with outstanding mortgages had fallen at least 30 days behind on their payments on a seasonally adjusted basis during the third quarter, compared with 4.44 percent in the same period a year ago, according to the Mortgage Bankers Association. homeowners falling behind on their mortgage payments

"It's a small rise and it's indicative of a weaker housing market, but not a weaker economy," said Ken Rosen, chairman of the Fisher Center for Real Estate Research at UC Berkeley. "If the economy were to get weaker, then that number would rise more rapidly. When people lose their jobs, delinquencies rise sharply."

The delinquency rate was highest in the South, where homeowners in Louisiana and Mississippi are still struggling to recover from Hurricane Katrina, and in the north central states, which have been hit by a significant loss of manufacturing jobs. California's delinquency rate was much lower than the national average because of the state's strong job growth. The biggest jump in late payments came among borrowers with low credit scores who take out high-interest rate loans. Their delinquency rate jumped to 12.56 percent from 10.76 percent a year earlier.

A 30 day mortgage late is the most damage a borrower can do to his/her credit score. It also can preclude the borrower from obtaining the best loans available. The 30 day mortgage late usually needs to be cured for 12 months. A qualified mortgage professional can assist you with your options if you feel you are going to have difficulty with your mortgage payment. The survey looked at 42.6 million loans, 13 percent of which were in the high interest rate category, according to the mortgage bankers group. Many of those borrowers with adjustable-rate loans are now saddled with higher interest payments.

People with low credit scores are more apt to take adjustable-rate mortgages because of the lower payment. The survey also found that the number of loans in the foreclosure process rose to 1.05 percent of all outstanding mortgages in the past quarter, compared with 0.97 percent for the same period a year ago.

Although other recently released reports have shown an increase in foreclosures and delinquent mortgage payments in California, the survey shows that the state is doing better than the rest of the country.

Only 2.68 percent of homeowners in the state are at least 30 days behind on their mortgage payments, according to the survey, which doesn't provide seasonally adjusted numbers for individual states.

"It's really job loss that causes people to lose their houses," said Berkeley's Rosen. "It's the economy first by a long way, and then the housing market and housing prices second."

For places such as San Diego and Sacramento, and other markets where home prices rose rapidly during the boom market, we can expect a bigger jump in delinquency rates and foreclosures.

     Jeff Kutnick
     President First Rate Lending