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The rise suggests many may not be able to afford their mortgages during the slowdown.
©New York Times
© St. Petersburg Times, published June 13, 2001
Faced with higher energy costs and increases in unemployment, more Americans are behind on their mortgage payments and delinquency has risen sharply in the last year.
Among the worst-hit have been the millions of families who bought homes for the first time in the 1990s as part of a much-celebrated growth in the nation's home ownership rate. The increase in the delinquency rate is particularly worrisome, housing analysts say, because it suggests many of the new homeowners who benefited from newly liberal lending standards may not be able to afford their current mortgages during slow economic times.
In a popular government-insured program to help people buy moderately priced homes, the percentage of homeowners whose loans are more than 30 days late exceeded 10 percent for the first time at the end of last year, according to a survey by the Mortgage Bankers Association in Washington. Even during the recessions of the early 1990s and the early 1980s, the rate did not exceed 8 percent. Overall, about 400,000 more families were at least 30 days late on their mortgages in the early months of this year, compared with the beginning of 2000.
In addition, thousands of other homeowners with "sub-prime" mortgages -- generally people with low income or a spotty credit history -- have begun missing payments in the past six months, according to the Mortgage Information Corp. in San Francisco. Despite the wider availability of mortgages in recent years, sub-prime loans remain one of the only options in some urban neighborhoods home to large numbers of minorities, recent studies have shown.
Foreclosure rates, which typically trail delinquency rates by many months, also have risen slightly this year as the percentage of homeowners more than 90 days behind on their payments has continued to rise.
The mortgage problems underscore one of the main reasons why many policymakers and economists are so concerned about whether the United States will enter a recession this year. In recent years, Americans have built up hundreds of billions of dollars of debt, and should the current economic slowdown worsen, many people could find themselves unable to pay their credit card, auto loan and mortgage bills, analysts say.
And even those better-positioned to ride out a longer downturn may be forced to cut back on spending to pay down debt, further weakening the economy.
But there are also signs that the worst may be over.
The Mortgage Bankers Association, a national trade group, points out that the number of loans 30 days or more past due has fallen slightly from a peak of 4.54 percent in the quarter ended Dec. 31 to 4.37 percent in the quarter ended March 31.
For Florida, the spike was even higher in December, with a 5.73 percent delinquency rate. But the subsequent falloff has been greater as well, with delinquencies standing at 4.69 percent statewide at the end of March.
The first-quarter numbers released Monday are still up from a year ago, but mortgage bankers association spokesman Dave Warner points out the country was enjoying a 28-year low in delinquencies last year.
During the last decade, lenders have begun offering many mortgages that require almost no down payment but that include relatively high monthly payments as a result. In part, they have responded to government pressure to make loans available in poorer communities and to increase the number of people able to afford a house.
And in part, bankers have simply realized they could use more sophisticated computer programs to screen mortgage applications and identify new groups of potential homebuyers in the process.
Between 1995 and the start of this year, the home ownership rate rose to a record 67.5 percent from 64.7 percent, according to the Department of Housing and Urban Development. From 1982 to 1995, it had actually fallen by a tenth of a percentage point.
But now, with companies eliminating jobs and overtime hours, and with the cost of gasoline, heating and air conditioning up sharply, many people who only recently grabbed onto the ladder to the middle class are struggling to hang on.
"This is the first time these loans have been tested," said Mark Zandi, the chief economist at Economy.com, a forecasting firm in West Chester, Pa. "The pace at which things have eroded reveals severe stress."
The level of delinquencies among the mortgages insured by the Federal Housing Administration is outrageous, said Mark P. Vitner, an economist at First Union in Charlotte, N.C. Vitner said banks probably would become stricter about lending if it remained as high as 10 percent.
"It is a very disturbing trend," he said.
Mortgage delinquency is especially high, and has risen especially fast, in the Southeast, home to a large concentration of manufacturers, which have cut tens of thousands of jobs since last summer.
Market Street Mortgage of Clearwater, the largest originator of home mortgages in the Tampa Bay area, will attest to more evidence of delinquencies.
The number of conventional loans that are at least 30 days delinquent has risen from 2 percent to 2.5 percent since March while the number of delinquent FHA loans has jumped from 8 percent to about 9 percent, Market Street chief executive Randy Johnson said Tuesday.
Market Street does not break down its delinquencies among the 11 states where it does business, but Johnson does not think that matters much in assessing the trend.
"I don't have anything to lead me to believe it's any different in Florida than anywhere else," he said.
For years, Florida has boasted some of the best-selling housing markets. In its latest list, the Mortgage Bankers Association listed Tampa as the eighth-hottest mortgage market in the country based on such factors as home sales, home prices, personal income and housing affordability.
In addition, almost 50 percent of all new homes built in the United States since January 2000 have been constructed in the region, defined broadly as stretching from Maryland to Florida to Texas, according to First Union.
Despite the problems, few people question whether the increase in home ownership over the last decade has been worthwhile. With more people owning their own homes -- 69.8-million last year, compared with 59-million in 1990, according to the Fannie Mae Foundation -- more people have a reason to work to improve their neighborhood, housing analysts say. But analysts are starting to ask whether the home-ownership boom can survive the current downturn.
- Times staff writer Jeff Harrington contributed to this report.