Record Number of Americans Lost Homes in '07

March 6, 2008 — -- A record number of homeowners lost their homes to foreclosure in the final months of 2007.

At the same time, an increasingly larger number of borrowers were late making their payments, setting the stage for possibly even more foreclosures in the months ahead.

"We don't expect to see the peak in delinquencies or foreclosures until mid- to late 2008," said Doug Duncan, the chief economist of the Mortgage Bankers Association.

The group reported this morning that 2.04 percent of mortgages nationwide were in foreclosure from October to December of last year. A record number of homes also entered the foreclosure process during the three-month period.

Additionally, the number of homeowners more than 30 days late with their monthly payment rose to 5.82 percent, up from 5.59 percent in the previous three-month period. That earlier rate had been the highest on record since 1985.

The bankers association National Delinquency Survey covers nearly 46 million outstanding loans nationwide.

There was more bad housing news today. The Federal Reserve announced that Americans' percentage of equity in their homes has fallen below 50 percent for the first time since 1945.

Home equity is equal to the percentage of a home's market value minus mortgage-related debt. On average, housing is Americans' single largest asset.

Not surprisingly, subprime borrowers were most likely to have trouble making their monthly payments. Nearly 14 percent of subprime mortgages with fixed interest rates were more than 30 days late. A total of 3.8 percent of fixed rate subprime loans were in foreclosure.

For subprime borrowers with adjustable rate mortgages, the situation was even direr. One in five was delinquent and 13.4 percent of the loans were in foreclosure. Many of the homeowners fell into trouble even before their payments reset higher.

"Many of the loans were already entering foreclosure well before their interest rate resets hit, which indicated an underlying credit quality problem as the main driver," Duncan said, adding that the decline in house prices was also having an effect.

That implies that even more subprime borrowers who will see rate increases in the months ahead could begin to fall behind in their monthly payments.

The surge in mortgage foreclosures and delinquencies underscores the precarious state of the housing market nationwide. Prices for existing homes fell 4.6 percent in January, compared to a year earlier and sales dropped more than 23 percent.