A record number of homeowners entered foreclosure at the end of last year
and more are making late mortgage payments, especially those with high-risk,
sub-prime and government-financed loans, according to a quarterly survey
released Tuesday by the Mortgage Bankers Association.
By MOLLY HENNESSY-FISKE and JESUS SANCHEZ found at Los
Angeles Times -Monterey Herald
Trader
Warren Meyers walks the floor of the New York Stock Exchange, Wednesday, March
14, 2007. Wall Street fluctuated Wednesday, seeking a direction a day after
concerns about faltering subprime mortgage lenders sparked a broad selloff in
stocks. (AP Photo/Richard Drew)
Meanwhile, problems mounted at two of Southern California's high-risk home
lenders. New Century Financial Corp. on Tuesday said it was under investigation
by federal securities regulators as the New York Stock Exchange suspended the
Irvine-based company from its stock listings. In San Diego, Accredited Home
Lenders Holding Co. said it was laying off workers and looking at ''strategic
options'' as its financial woes worsened.
The national survey showed that 4.95 percent of average mortgage loans had
late payments, compared to 4.67 percent the previous quarter and 4.7 percent a
year before. It was the worst showing since spring 2003.
The fraction of mortgages entering foreclosure during the fourth quarter of
2006 climbed to 0.54 percent, the highest since the association started
reporting in 1972. The previous high of 0.50 percent occurred in the second
quarter of 2002 as the country was recovering from a recession.
The survey covered about 80 percent of the mortgage market, more than 43.5
million loans, including 33.3 million prime loans, 6 million sub-prime loans and
4 million government loans.
The association's chief economist, Doug Duncan, said troubled sub-prime and
Federal Housing Administration loans drove the increase in late mortgage
payments. Late payments for FHA loans reached a historical high of 13.46 percent
during the fourth quarter last year, up from 12.8 percent the previous quarter
and 13.18 percent a year before, according to the survey.
Duncan said regulators shouldn't overreact to the survey by curbing the
sub-prime market.
''The preponderance of borrowers who take those loans graduate into the prime
market,'' Duncan said. ''An overreaction could curtail the options for consumers
and aggravate the slowdown that has been under way in both housing and consumer
finance.''
Duncan predicted that home prices would remain flat in coming years -- down 1
percent in 2007, up 1 percent in 2008 -- and that the Federal Reserve would hold
interest rates steady as growth remained a stable 3.1 percent in 2007 and
unemployment climbed to 5 percent.
In a double dose of bad news for New Century, the lenders said in a
regulatory filing that the Securities and Exchange Commission was conducting a
''preliminary investigation'' into the company and requested certain documents.
''The staff of the SEC had also previously requested a meeting with the
company to discuss the events leading up to the company's previous announcement
of the need to restate certain of its historical financial statements,'' New
Century said. ''The company intends to cooperate with the requests of the SEC.''
Separately, the New York Stock Exchange said it was removing New Century's
stock listing in light of the company's mounting financial problems and
questions surrounding its financial statements. ''The NYSE has determined that
the company's common stock and preferred securities are no longer suitable for
continued listing on the NYSE,'' the exchange said in a statement.
Investors in Accredited Home Lenders dumped the stock as the sub-prime
mortgage company said it was seeking to raise cash and renegotiate the terms of
some of its loans and lines of credit.
The stock plunged nearly 63 percent, or $7.17, to $4.23 a share in late
afternoon trading on the New York Stock Exchange.
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“There’s so much inventory out there that the buyer can pick and choose,” said Susan Sirles Fidler, a Realtor at Re/Max 10, Oak Lawn. But she cautioned, “The stuff that’s almost free is almost free because it’s going to cost you an arm and a leg to put it back together. It’s not buyer beware as much as buyer be smart.”
