The number of homes that are delinquent on the mortgage payments or have fallen into the foreclosure process hit record levels in the second quarter of 2008, according to the latest "National Delinquency Survey" released by the Washington-based Mortgage Bankers Association (MBA) this morning. 

That survey, based on 45.4 million loans for one- to four-unit residential properties serviced, found that 6.41 percent were past-due on their payments, representing a 25.2 percent increase over the same quarter in 2007. The number of loans in foreclosure rose 83 percent to 1.19 percent, the first time in the survey's 29-year history that this number was above 1 percent. The number of loans that were "seriously delinquent," or at least 90 days, jumped 8.15 percent to 4.52 percent of the total in the second quarter.

Jay Brinkmann, the association's new chief economist, said in a teleconference this morning that the second-quarter foreclosure rate for all subprime loans specifically translates to 27 percent on an annualized basis.

He also noted that two states--California and Florida--accounted for 39 percent of all loans that entered the foreclosure process during the second quarter and 58 percent of all prime adjustable-rate foreclosures, even though those states only represent 21 percent of all loans outstanding.

The number of new foreclosures among prime adjustable-rate mortgages (ARMs) tripled to 1.82 percent; subprime ARMs that entered foreclosure in the quarter rose nearly 16 percent to 4.7 percent of the total within this group.

MBA's data also show that 17.85 percent of subprime ARMs were 90 days or more delinquent on their payments.

Brinkmann did see some positive signs in the fact that only eight states had foreclosure starts that were higher than the national average; and that delinquency rates in the second quarter declined from the first quarter of 2008 for subprime ARMs, FHA loans, and VA loans. "The problems are not widespread," he said.

However, Brinkmann was also quick to note that "what stands out is that we are unlikely to see a national turnaround until there is a decline in the foreclosures in California and Florida." Brinkmann added that delinquent loans in California now have a much greater likelihood of going into foreclosure than in past quarters.

State by state, Mississippi had the country's highest delinquency rate in the quarter, 10.44 percent, followed by Michigan and Georgia, at 8.55 percent and 8.06 percent, respectively. States with the highest number of loans in the foreclosure process were Florida (6 percent), Nevada (4.92 percent), and Ohio (3.97 percent). The three states with the highest rates of loans entering the foreclosure process in the quarter were Nevada (2.24 percent), Florida (2.21 percent), and California (1.82 percent). Conversely, Brinkmann pointed out that Massachusetts had seen "big improvements" in its foreclosure inventory, and that Michigan, while still in bad shape, had gone through three consecutive quarters with no percentage increases.

MBA's survey mostly squares with new monthly data released by Hope Now, a Washington-based alliance of mortgage servicers, counselors, and market participants, which estimates that in July, 3.59 percent of all loans outstanding were 60 days or more late in their payments, versus 2.36 percent in July 2007. Hope Now found that 13.8 percent of subprime loans and 2.16 percent of prime loans were 60-plus days delinquent in July, both significant increases over the same month a year ago.

On the positive side, Hope Now claims that from the third quarter of 2007 through July 2008, lenders had kept more than 2 million loans from descending into foreclosure by working out repayment or loan-modification plans with borrowers.

John Caulfield is a senior editor at BUILDER magazine.

Learn more about markets featured in this article: Washington, DC, Los Angeles, CA.