RTTNews - Foreclosure rates jumped in the first quarter of 2009, setting another record as unemployment forced more people to leave their homes. The Mortgage Bankers Association revealed Thursday that 1.37 percent of mortgages entered foreclosure process in the first three months of 2009, up from 1.08 percent in the fourth quarter 2008.

The increase in the foreclosure number is sobering but not unexpected, Jay Brinkmann, MBA's chief economist said in a statement. The rate of foreclosure starts remained essentially flat for the last three quarters of 2008 and we suspected that the numbers were artificially low due to various state and local moratoria, the Fannie Mae and Freddie Mac halt on foreclosures, and various company-level moratoria.

Now that the guidelines of the administration's loan modification programs are known, combined with the large number of vacant homes with past due mortgages, the pace of foreclosures has stepped up considerably, he added.

In addition to the high foreclosure rate, the number of loans that are at least one payment past due, or delinquent, spiked in the first three months of the year. The delinquency rate was a seasonally adjusted 9.12 percent, up from 7.88 percent in the fourth quarter.

Adding to the dismal report, the total number of homes in the foreclosure process increased to 3.85 percent of all mortgages, up from 3.3 percent in the last three months of 2008.

The MBA offered a gloomy outlook for the future of foreclosures, stating that until unemployment peaks and the labor markets improve, which is not expected until mid 2010, foreclosure rates will remain high.

Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after mid 2010, he said.

As the crisis spreads, subprime, option ARM, and Alt-A loans are no longer the sole focus of the foreclosure problem. Rather, the foreclosure rate on prime fixed-rate mortgages has doubled in the last year, evidence that the recession and rising unemployment is making the housing crisis even worse.

For the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures, Brinkmann said. More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults.

However, while the bulk of foreclosures has shifted, where foreclosures are located geographically remains the same. California, Florida, Arizona and Nevada still drive up the national numbers, accounting for around 46 percent of the foreclosure starts in the country and 56 percent of the increase in foreclosure starts.

In Florida, 10.6 percent of the mortgages are now somewhere in the process of foreclosure, with Nevada at 7.8 percent, Arizona at 5.6 percent and California 5.2 percent.

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