Foreclosure filings reach record in 4Q

Survey also reports rise in late payments

March 14, 2007|By Molly Hennessy-Fiske and Jesus Sanchez | Molly Hennessy-Fiske and Jesus Sanchez,Los Angeles Times

A record number of homeowners entered foreclosure at the end of last year and more are making late mortgage payments, especially those with high-risk subprime and government-financed loans, according to a quarterly survey by the Mortgage Bankers Association released yesterday.

In other developments, subprime lender New Century Financial Corp., of Irvine, Calif., said yesterday that the Securities and Exchange Commission had demanded documents and that the New York Stock Exchange had suspended the company from its stock listings.

Another subprime lender, Accredited Home Lenders Holding Co., of San Diego, said it was laying off workers and looking at "strategic options" as its financial woes worsened.

The MBA national survey showed that 4.95 percent of average mortgage loans had late payments in the fourth quarter, compared with 4.67 percent in the third quarter and 4.7 percent in the final quarter of 2005. The showing in the fourth quarter last year was the worst since spring 2003.

The fraction of mortgages entering foreclosure in the fourth quarter climbed to 0.54 percent, the highest since the association started reporting in 1972. The previous high of 0.50 percent occurred in the second quarter of 2002, as the country was recovering from a recession.

In Maryland, which has a better-than-average record, the share of loans entering foreclosure during the fourth quarter rose to 0.31 percent. The delinquency rate in the state ranged from 2.2 percent for prime loans to just over 13 percent for FHA loans.

The MBA survey covered about 80 percent of the nationwide mortgage market - more than 43.5 million loans, including 33.3 million prime loans, 6 million subprime loans and 4 million government loans.

Douglas G. Duncan, the MBA's chief economist, said troubled sub-prime and Federal Housing Administration loans drove the increase in late mortgage payments. Late payments for FHA loans reached a historical high of 13.46 percent in the fourth quarter, up from 12.8 percent in the third quarter and 13.18 percent in the final quarter of 2005, the survey said.

Duncan said regulators shouldn't overreact to the survey by curbing the subprime market.

"The preponderance of borrowers who take those loans graduate into the prime market," he said.

"An overreaction could curtail the options for consumers and aggravate the slowdown that has been under way in both housing and consumer finance."

Duncan predicted that home prices would remain flat in coming years - down 1 percent in 2007, up 1 percent in 2008 - and that the Federal Reserve would hold interest rates steady as growth remained a stable 3.1 percent in 2007 and unemployment climbed to 5 percent.

In more bad news for New Century, the lender said in a regulatory filing that the Securities and Exchange Commission was conducting a "preliminary investigation" into its activities and had requested certain documents.

Earlier this year, the New York Stock Exchange and the federal prosecutor in Santa Ana, Calif., had announced investigations of the company as its stock plummeted 90 percent. Trading in New Century was halted Monday when its shares reached $1.66.

The exchange said yesterday that it was removing New Century's stock listing in light of the company's mounting financial problems and questions surrounding its financial statements.

Investors in Accredited Home Lenders dumped the stock as the mortgage company said it was seeking to raise cash and renegotiate the terms of some of its loans and lines of credit.

Accredited's shares plunged $7.43, or 65.2 percent, to close at $3.97 yesterday on the New York Stock Exchange.

Molly Hennessy-Fiske and Jesus Sanchez write for the Los Angeles Times. Sun reporter Jamie Smith Hopkins contributed to this article.

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