naked capitalism

More cheery news on the housing front. The rise in foreclosures wasn’t unexpected, since there are widespread, albeit anecdotal reports of banks being backlogged on foreclosures, either by virtue of design or understaffing. But notice how prime mortgages are a significant component of new foreclosures.

From Bloomberg:

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA’s chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.

More commentary from Reuters:

“The national foreclosure numbers continue to be driven by the hardest-hit states continuing to get much worse,” Jay Brinkmann, the association’s chief economist and senior vice president for research and economics, said in a news release.

The increases in foreclosures in California and Florida overwhelmed improvements in states such as Texas, Massachusetts and Maryland, he said.

“It is unsurprising that mortgage delinquencies picked up further in the second quarter,” John Ryding, chief economist, and Conrad DeQuadros, senior economist, at RDQ Economics in New York, said in commentary.

“However, the increase in delinquencies and foreclosures up to this point is most likely predominantly the product of poor underwriting standards. Going forward, we have to overlay the weak economy and labor market picture as this more traditional driver of delinquencies will probably become more of a factor,” they said.