Mortgage delinquency rate hits 7% in Ariz., U.S.

by Catherine Reagor - Dec. 6, 2008 12:00 AM
The Arizona Republic

More people are falling behind on their mortgage payments in Arizona and much of the United States as job losses mount, the financial markets struggle and the recession lengthens.

Arizona's mortgage-delinquency rate climbed to 7.39 percent at the end of the third quarter, on Sept. 30, according to new data from the Mortgage Bankers Association. At the end of the second quarter, on June 30, about 6.05 percent of the state's homeowners were late with payments.

Mississippi leads the nation in mortgage delinquencies, with about 11.7 percent of mortgages now past due. Louisiana follows with 10 percent, and Michigan is third at 9.7 percent.

The national mortgage-delinquency rate is 7 percent, the highest it has been since the group began tracking late payments in the 1950s.

"While much of the mortgage problem in some states continues to be overbuilding, poor underwriting and incorrect credit pricing, fundamental economic factors are becoming more important," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.

"We have not gone into past recessions with the housing market as weak as it is now, so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past."

Mortgage delinquencies are usually a precursor to foreclosures. In metropolitan Phoenix, a record 40,000 homes have been foreclosed on so far this year.

Some lenders are working with struggling homeowners to modify mortgages and lower monthly payments.

Bank of America, which bought Countrywide last summer, has halted foreclosure on more than 2,000 Valley homes as part of a deal with Arizona Attorney General Terry Goddard. Many of those homeowners are now being offered loan-modification programs, but it won't be enough for some borrowers.

Early in 2009, Arizona will get $121 million from the federal housing-bailout package passed last summer. The money is slated to go toward helping neighborhoods hit hardest by foreclosures.

But housing advocates say even more money and aid must go toward helping people avoid foreclosure and stay in their homes.

Arizona State University business professor Anthony Sanders believes modifying the loans of struggling homeowners is one of the best ways to stabilize the housing market. He recently testified in Congress about the financial bailout plan.

"It is of critical importance to find ways to slow down the delinquency and foreclosure waves, if economically viable," he said.