U.S. foreclosures soar; Utah's low

Late mortgage payments and foreclosures are skyrocketing across the nation, but Utah now carries one of the lowest foreclosures rates, according to a new report.

The quarterly delinquency survey by the Mortgage Bankers Association fueled a Wall Street sell-off on Tuesday, with the Dow Jones industrial average plunging 242.66 points.

"It's clear that it is a big mess," said Kelly Matthews, executive vice president and economist at Wells Fargo in Salt Lake City. "We've got a segment of the mortgage industry that has got to go through some adjustment. It's a situation where mortgages were given to individuals without the appropriate evaluation of risk."

Nationally, late mortgage payments in the fourth quarter climbed to 5.31 percent, up from 5.06 percent in the fourth quarter of 2005. U.S. foreclosures rose to 1.19 percent in the fourth quarter, up from 0.99 percent a year earlier in the same period.

But in Utah, mortgage delinquencies — loans 30 days or more late — fell to 4.01 percent in the fourth quarter of 2006, down from 4.36 percent in the same quarter in 2005. The percent of Utah loans in the foreclosure process fell to 0.61 percent, down from 0.96 percent a year earlier. Thirty-eight states now have higher foreclosure rates than Utah.

Driving the national increase in delinquencies and foreclosures was a sharp increase in late payments on subprime loans, which are made to people with riskier credit.

Doug Duncan, MBA's chief economist and senior vice president, said late mortgage payments on subprime loans nationally climbed to 14.27 percent in the fourth quarter, up from 12.47 percent in the fourth quarter of 2005. Roughly 14 percent of the outstanding U.S. loan portfolio in the fourth quarter was subprime loans.

"When you see subprime borrowers who don't manage credit well, who have adjustable terms in their mortgages and the underlying interest rates rise, their payments are going to rise and that will lead to an increase in delinquencies," Duncan said. "Although the U.S. economy and job market remain solid, the housing market continued to decelerate in the fourth quarter of 2006."

In a 2005 report, the Center for Responsible Lending estimated that 2.2 million borrowers will lose their homes and up to $164 billion of accumulated wealth in the foreclosure process because of subprime mortgages, which often carry prepayment penalties and balloon payments.

"Unfortunately, it appears delinquency rates will likely worsen before they improve," Gina Martin, economist at Wachovia Corp. Economics Group, told the Associated Press.

Yet Matthews believes the crisis will be short-lived.

"It's clear there is a problem," Matthews said. "But one would hardly believe that this is going to be a trigger that is going to cause significant difficulty in the overall economy."

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