Record 7.5 Million Homes in Default

More than a record 7.5 million residential mortgages are delinquent or in foreclosure, and one million other properties are either banked owned or are waiting to be resold, according to Lender Processing Services, Inc. the nation’s largest provider of mortgage data.

Foreclosed Homes

The February report shows historic numbers, but also indicates that the pace of deterioration has slowed. The foreclosure pipeline is clogged as a result of record volume with some foreclosures taking more than 30-months to complete. The majority of the nation’s 50 largest banks subscribe to Lender Processing Services.

About two-thirds of the nation’s residential mortgages are managed by LPS. The remaining mortgages are managed by smaller local banks and other lending institutions, which also have high levels of foreclosures.

Despite improving mortgage modifications, the number of delinquencies is rising as problem loans grow. More than 31% of mortgages that have been delinquent more than six months are not in foreclosure, according to the report. Nearly 23% of loans delinquent for a year have not entered the foreclosure stage.

The report clearly shows that the “shadow inventory” of troubled homes and other properties is rapidly growing, and is an indication that the foreclosure crisis may exceed the total of 20 million foreclosures forecast by Housing Predictor in the crisis. Chris Dodd (D-Conn), the ranking chairman of the U.S. Senate banking committee says that 7 million foreclosures have already been made by bankers nationally.

High real unemployment, including those that are not counted in national figures as under employed and those who have stopped looking for work all together tops 20% in 38 states. Job losses are contributing heavily to the foreclosure crisis as more and more people lose incomes.

Older mortgages now make up a higher proportion of new delinquencies with the average age now being 46 months compared to 27 months in January, 2007. Some 346,000 mortgages were late for the first time last January. Adjustable rate mortgages and conventional 30-year loans now compose the highest number of foreclosures, indicating that the foreclosure crisis has moved aggressively into the overall housing market.

The report also shows that 10.2% of all U.S. mortgages are delinquent and that 13.5% of mortgages are late, which is also the largest figure on record in U.S. history. With one of the highest foreclosure rates in the country, Florida has 23.5% of all mortgages in delinquency. Nevada, Mississippi, Arizona, Georgia and California follow the sunshine state.

The higher delinquency rates in the sun-belt states may be attributable to greater numbers of second homes and vacation properties in Florida, Nevada and Arizona. Owners of second homes more easily allow their vacation homes to enter foreclosure than their principal residences.