Mortgage Default Rate Highest since 1972

A Record Level of U.S. Families Make Late Mortgage Payments

May 30, 2009

U.S. mortgage default rates are now at their highest since 1972. As delinquency rates have accelerated, so has the incidence of mortgage foreclosure.

The latest Mortgage Bankers Association (MBA) report showed that the delinquency rate had reached a seasonally adjusted figure of 9.12%; this is up from 7.88%. Mortgage foreclosure rates also increased to a staggering 1.37%. These figures have led many economists to question the effectiveness of President Obama's multi-billion dollar housing rescue plan. Millions of homeowners are still unable to keep-up with their mortgage payments.

Mortgage Default Rates Highest Amongst Prime Borrowers

Whilst the majority of political attention has understandably been focused on defaulting subprime borrowers, the delinquency rate is 43%. The prime mortgage default rate stands at a colossal 50%. Just 7.1% were Federal Housing Administration loans.

Rising U.S. Unemployment Behind Higher Delinquency Rates

The fact that mortgage default rates have increased amongst prime borrowers is a clear sign that rising unemployment is seriously affecting peoples' ability to make mortgage payments. According to the U.S. Bureau of Labor Statistics (BLS), unemployment reached a 26-year high of 8.9% in April 2009.

States Worst Affected by Mortgage Foreclosures

The states with the highest delinquency rates are the ones that have been most heavily affected by negative equity. Borrowers are becoming increasingly reluctant to make mortgage payments on properties that aren't worth anywhere close to the value of the outstanding home loan.

Is Negative Equity Behind Mortgage Defaults?

First American CoreLogic produced data that showing that 20% of all U.S. homeowners are underwater with negative equity. Figures are highest in the areas that experienced the largest gains during the property boom. Nearly 48% of borrowers in Nevada are currently in negative equity; this is followed by Florida (29%), Arizona (29%) and California (27%).

Rising unemployment is causing mortgage default rates to escalate as families are unable to afford their mortgage payments. With homeowners struggling with negative equity, mortgage foreclosure and short selling appear to be increasingly viable options. Delinquency rates will only start to fall once the property market recovers from it's losses.

Howley, Kathleen. (29 May, 2009). "Late mortgage payments hit highest level since '72." The Boston Globe.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

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