Risk of foreclosure dips, but remains elevated

NEW YORK — Fewer Americans fell behind on their mortgage payments in the final three months of last year, but foreclosures are still rising.

The Mortgage Bankers Association said Thursday 8.2 percent of homeowners missed at least one mortgage payment in the October-December quarter. The figure, which is adjusted for seasonal factors, improved from 9.1 percent in the previous quarter and from a high of more than 10 percent in the January-March quarter.

The percentage of homes in the foreclosure process rose to 4.6 percent from 4.4 percent, tying an all-time high for the survey. Foreclosures are expected to peak this year as 5 million troubled loans move through the process.

Typically, the percentage of seriously delinquent borrowers — those more than 90 days behind on their mortgages or in foreclosure — is just above 1 percent. In the fourth quarter, that figure was 8.57 percent.

An improving job market is behind the decline in the delinquency rate, said MBA Chief Economist Jay Brinkmann. He noted that the private sector added 1.2 million jobs last year and the number of people applying for unemployment benefits started to fall in the fourth quarter.

"It's a sign we've turned a corner, that's the good news," Brinkmann said. "The bad news is loans in foreclosure are still very high."

Foreclosures dipped in the July-September quarter as lenders addressed allegations of improper paperwork during the foreclosure process. But by the final three months of last year, many had resumed taking back homes.

Banks are on track to repossess more than 1 million homes this year, the most since the housing meltdown began, according to foreclosure tracker RealtyTrac Inc. That will drive home prices down because foreclosures are sold at deep discounts.

The foreclosure crisis started years ago when borrowers took out risky loans with adjustable interest rates that they couldn't afford. Many also qualified for loans without providing proof of income. The crisis spread to homeowners with good credit who took out safe, fixed-rate mortgages, but are struggling in a weak economy.