sub-prime mortgages
Foreclosure numbers on the rise
Record numbers of mortgages reported late
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, sub-prime and government-financed loans, according to a quarterly survey released Tuesday by the Mortgage Bankers Association.
By MOLLY HENNESSY-FISKE and JESUS SANCHEZ found at Los Angeles Times -Monterey Herald
Trader
Warren Meyers walks the floor of the New York Stock Exchange, Wednesday, March
14, 2007. Wall Street fluctuated Wednesday, seeking a direction a day after
concerns about faltering subprime mortgage lenders sparked a broad selloff in
stocks. (AP Photo/Richard Drew)
Meanwhile, problems mounted at two of Southern California's high-risk home lenders. New Century Financial Corp. on Tuesday said it was under investigation by federal securities regulators as the New York Stock Exchange suspended the Irvine-based company from its stock listings. In San Diego, Accredited Home Lenders Holding Co. said it was laying off workers and looking at ''strategic options'' as its financial woes worsened.
The national survey showed that 4.95 percent of average mortgage loans had late payments, compared to 4.67 percent the previous quarter and 4.7 percent a year before. It was the worst showing since spring 2003.
The fraction of mortgages entering foreclosure during the fourth quarter of 2006 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.
The survey covered about 80 percent of the mortgage market, more than 43.5 million loans, including 33.3 million prime loans, 6 million sub-prime loans and 4 million government loans.
The association's chief economist, Doug Duncan, 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 during the fourth quarter last year, up from 12.8 percent the previous quarter and 13.18 percent a year before, according to the survey.
Duncan said regulators shouldn't overreact to the survey by curbing the sub-prime market.
''The preponderance of borrowers who take those loans graduate into the prime market,'' Duncan 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 a double dose of bad news for New Century, the lenders said in a regulatory filing that the Securities and Exchange Commission was conducting a ''preliminary investigation'' into the company and requested certain documents.
''The staff of the SEC had also previously requested a meeting with the company to discuss the events leading up to the company's previous announcement of the need to restate certain of its historical financial statements,'' New Century said. ''The company intends to cooperate with the requests of the SEC.''
Separately, the New York Stock Exchange said it was removing New Century's stock listing in light of the company's mounting financial problems and questions surrounding its financial statements. ''The NYSE has determined that the company's common stock and preferred securities are no longer suitable for continued listing on the NYSE,'' the exchange said in a statement.
Investors in Accredited Home Lenders dumped the stock as the sub-prime mortgage company said it was seeking to raise cash and renegotiate the terms of some of its loans and lines of credit.
The stock plunged nearly 63 percent, or $7.17, to $4.23 a share in late afternoon trading on the New York Stock Exchange.
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