Troubled Mortgages Hit Record High

The mass of home-owners behind on their mortgage or in foreclosure rose to its highest levels in at least four decades, despite the continuous talk or green shoots and extensive government slants or data showing that the economy is starting to heal.

The problem has shifted from the subprime loans that helped spark the foreclosure crisis to borrowers driven into delinquency by unemployment, according to the Mortgage Corporate Bankers Association, which issued the survey. The recession’s impact on the market could send foreclosure rates up through the end of next year, said Jay Brinkmann, the group’s chief economist.

“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves,” he said.

About 9.24 percent of borrowers were delinquent on their first time buyer mortgage during the second quarter, according to the survey, and 4.3 percent more were somewhere in the foreclosure process. Overall, one in eight, or 13.16 percent, of mortgage loans were delinquent or in the foreclosure process during the quarter, according to the group.

That is the highest level ever recorded by the survey, which has been conducted since 1972, and breaks the high mark set during the first quarter. It is up from about 9 percent during the second quarter of 2008.

“I think these numbers reflect the gap between the number of modifications that have been done and the need that still exists,” said Charlene Crowell, a spokeswoman for the Center for Responsible Lending. “Until that gap is closed, the housing market will continue to suffer, and investments with fail too.”

More than half the mortgages in the foreclosure process during the second quarter were prime loans, which are traditionally considered safer and make up the bulk of the mortgages outstanding in the country. Subprime loans are still a significant portion of the problem, but their impact has been shrinking as the recession and rising unemployment have taken over as a driving force in the foreclosure crisis, Brinkmann said.