Mortgage Payments One Month Late Jump as Economy Weakens

The percentage of U.S. mortgages overdue by one month rose to the highest level in a year in the second quarter as homeowners who lost jobs were unable to make their payments.

The share of home loans overdue by 30 days rose to 3.46 percent of all mortgages, from 3.35 percent in the first quarter, according to a report today from the Mortgage Bankers Association in Washington. The percentage of mortgages overdue by 60 days increased to 1.37 percent from 1.35 percent, while foreclosures dropped for the second consecutive quarter.

The gain in early delinquencies signals a slowing economy may increase foreclosures, said Jay Brinkmann, chief economist of the trade group. The unemployment rate in the three months ended June 30 rose to 9.1 percent from 8.9 percent, the first quarterly increase since 2009, according to the Labor Department. Jobless claims jumped to an eight-month high in late April, government data show.

“Delinquencies very much reflect what’s going on in the labor market, and we saw those numbers deteriorate,” Brinkmann said in a telephone interview today. “The slowdown in delinquencies we saw in prior quarters stopped the bleeding, but this uptick could lead to more foreclosures.”

The delinquency rate for all mortgages rose to 8.44 percent in the second quarter from 8.32 percent the previous three months. The so-called seriously delinquent rate -- loans either in default or in foreclosure -- dropped to 7.85 percent from 8.1 percent as banks began to catch up on cases delayed by backlogs and documentation errors, Brinkmann said.

Foreclosure Overhang

“The overhang tied to delays in the court system is improving slowly, though we still have a large backlog,” Brinkmann said.”

The inventory of homes in foreclosure fell to 4.43 percent from 4.52 percent in the first quarter, the second consecutive quarterly decline, according to the Mortgage Bankers’ report. New foreclosures dropped to 0.96 percent from 1.08 percent, the third consecutive slump, the trade group said.

The world’s largest economy grew at a 1.3 percent annual rate in the second quarter, the Commerce Department said on July 29. That was less than the increase of 1.8 percent forecast by economists surveyed by Bloomberg. A Federal Reserve report last week showed manufacturing in the Philadelphia region contracted in August by the most in more than two years as orders fell and factories fired workers.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. lowered their forecasts for U.S. gross domestic product last week. The U.S. will expand 1.5 percent this year, down from a previous forecast of 1.7 percent, according to Goldman economists in New York. JPMorgan predicts 1 percent growth in U.S. GDP in the fourth quarter, down from an earlier projection of 2.5 percent, the bank said last week.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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