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Foreclosure Math: 4 + 3 = 1 Big Mess

In foreclosure mathematics, 4 plus 3 equals 1, as in one big mess. At least that’s the way it seemed at today’s conference call for journalists by the Mortgage Bankers Association.

Four is the number of big states—California, Florida, Nevada, and Arizona—where the share of mortgage loans entering the foreclosure process leaped in the first quarter of 2007. The spate of actions in those four states caused the national rate of foreclosure starts to rise to 0.58% seasonally adjusted, breaking the record set in the previous quarter. Without them, the foreclosure start rate wouldn’t have set a record, the bankers said.

Three is the number of states—Ohio, Michigan, and Indiana—with an exceptionally large share of loans already in some stage of the foreclosure process. While they account for just under 9% of the nation’s overall mortgage loans, they account for about 20% of the loans that are in foreclosure. Without them, the share of loans in foreclosure nationwide would have been below the average of the last 10 years (1.12% vs. a 10-year average of 1.19%), the bankers said.

The mortgage bankers’ point seems to be that mortgage problems are highly concentrated and not a national crisis.

Of course, excluding those seven states from the Union may be an easy mathematical exercise but doesn’t have much bearing on real life. The pain they’re experiencing is real even if it isn’t equally shared in the rest of the country.

(Footnote: The Mortgage Bankers Association quarterly numbers are less current, but more accurate, than the monthly estimates put out by RealtyTrac, which Chris Palmeri wrote about a couple days ago.)

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