Mortgage Payments One Month Overdue Increase as U.S. Economic Growth Slows
The percentage of U.S. mortgages with one overdue payment rose in the second quarter, the first gain in early delinquencies in more than a year, as economic growth slowed and jobless claims increased.
Home loans overdue by a month climbed to 3.51 percent, from 3.45 percent in the first quarter, according to a report today from the Washington-based Mortgage Bankers Association. The increase was led by mortgages guaranteed by the Federal Housing Administration. The one-month late rate for that type of home loan rose to 5.77 percent from 5.54 percent.
The gain suggests a slowing economy may increase foreclosures as mortgage holders lose their jobs, said Jay Brinkmann, chief economist of the group. New unemployment claims, measured as a monthly average, rose throughout the second quarter after falling in most of the prior period, according to data from the Labor Department in Washington.
“As we work through the bucket of troubled loans, we’re seeing an increase in a new crop of troubled loans,” Brinkmann said in an interview. “It’s primarily driven by the jobs market. It still takes a paycheck to make a mortgage payment.”
Unemployment averaged 9.7 percent during the second quarter, near the 10 percent rate of 2009’s final three months that was the highest since 1983, according to the Bureau of Labor Statistics. For the year, the rate may average 9.6 percent, based on the median estimate of economists in a Bloomberg survey. That would be a 27-year high.
Gross domestic product increased 1.4 percent in the second quarter, the slowest rate since the recovery began, according to the median estimate of economists in a Bloomberg survey before a government report tomorrow. That’s down from the 2.4 percent rate initially reported by the Commerce Department last month. In the first quarter, the rate was 3.7 percent.
The inventory of homes in foreclosure fell to 4.57 percent from a record 4.63 percent, the first decline since 2006, as more loans were modified and a federal tax credit for homebuyers boosted short sales of homes in default. The percentage of loans late by two or more payments dropped in the second quarter, according to the MBA report.
Homeowners more than 60 days past due on their loans are eligible for the Obama administration’s primary anti-foreclosure plan. The Home Affordable Modification Program, or HAMP, resulted in 340,459 permanent modifications by the end of May, according to the Treasury Department. In addition, 467,672 trial modifications were under way. The Obama administration set a goal of up to 4 million modifications by December 2012 when the program was announced last year.
HAMP lowers mortgage payments to about a third of borrowers’ income by reducing interest, lengthening terms and deferring principal payments.
Foreclosure actions were started against 1.11 percent of the loans, down from 1.23 percent in the first quarter, according to the MBA report. The share of so-called seriously delinquent loans, overdue by three or more months plus loans in foreclosure, fell to 9.11 percent from 9.54 percent.
“Most of the numbers from the report were just marginally better than they were in the first quarter -- they’re still awful numbers,” said Patrick Newport, an economist with IHS Global Insight Inc. in Lexington, Massachusetts. “The key going forward is what happens to the labor market.”
Recent data show the housing market has deteriorated in the current quarter. Sales of existing homes plunged a record 27 percent last month to 3.83 million at an annual pace, the lowest in a decade of record-keeping, according to an Aug. 24 report from the National Association of Realtors. Purchases of new houses fell 12 percent to an annual pace of 276,000, the weakest since data began in 1963, a Commerce Department said yesterday.
Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.