Record numbers having trouble paying mortgage

WASHINGTON — More than 4 million American homeowners with a mortgage — a record 9 percent — were either behind on their payments or in foreclosure at the end of June, as damage from the housing crisis worsened, the Mortgage Bankers Association said Friday.

But the source of trouble in the mortgage market has shifted from subprime loans made to borrowers with poor credit to homeowners who had solid credit but took out exotic loans with ballooning monthly payments.

"The problem that policymakers and Wall Street once assured us was 'contained' to subprime mortgages has proven to be anything but," Mike Larson, a real-estate analyst with Weiss Research, said in a research note.

The trouble is concentrated in a handful of states, the worst being California and Florida, which had some of the riskiest lending practices and rampant speculation.

"We are unlikely to see a national turnaround until we see a turnaround in the two largest states," with the most outstanding home loans, said Jay Brinkmann, the association's chief economist.

The latest quarterly figures broke records for late payments, homes entering the foreclosure process and for the inventory of loans in foreclosure. The trade group's records go back to 1979.

The percentage of loans at least one month past due or in foreclosure was up from 8.1 percent in the January-March quarter, and up from 6.5 percent a year ago, using figures that were not adjusted for seasonal factors.

New foreclosures rose dramatically in eight states: Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana and Ohio, but actually declined in Texas, Massachusetts and Maryland.

Almost 500,000 homeowners, or about 1 percent, entered the foreclosure process in the second quarter.

In Utah, 4.33 percent of home loans were delinquent, and 1.23 percent were in foreclosure at the end of the second quarter, the report said. Both figures were well below the national rate of 6.41 percent for past due loans and 2.75 for foreclosures.

But a recent report by market-analysis firm RealtyTrac indicated that foreclosures in Utah rose 22 percent in the second quarter of 2008, compared with the first three months of the year.

Nationally, for the first time since the mortgage crisis started, delinquencies on subprime adjustable-rate loans declined. While more than one out of every five homeowners with a subprime ARM is still in default, that portion dipped 1 percentage point from the first quarter to 21 percent.