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Economy in Brief

U.S. Mortgage Foreclosures Continued To Surge
by Tom Moeller March 12, 2008

The Mortgage Bankers' Association reported that during the 4th quarter of 2007, foreclosures were started on .83% of all mortgages outstanding. That was by far the highest foreclosure rate on record. Moreover, it raised the total for the full year to 2.84% of the number outstanding.Foreclosure rates on both prime and subprime mortgages rose sharply last year.

Foreclosures on all prime mortgage loans rose to 0.41% by yearend and totaled 1.30% of those outstanding for the full year. That was nearly double the rate during the prior nine years.

Though rates for prime fixed rate mortgages held steady at yearend at 0.22% of loans outstanding, the foreclosure rate for the year of 0.79% was a record and it was up from 0.56% during 2006. There were 25.8 million of these loans outstanding last year. Of the 6.5 million prime adjustable rate mortgages during 4Q, the foreclosure rate rose to 1.06%. That pulled the full year rate of foreclosures up to 3.23% which was nearly triple the rate during 2006.

As bad as the above data on prime debt was, the figures on subprime mortgage debt were far worse. Though short-term interest rates fell slightly during the year the average level of rates was double that a few years earlier. In total, the rate of foreclosure on subprime mortgages rose to 3.44% of outstanding loans during 4Q '07. The rise pulled foreclosures for the full year to 11.71% of loans outstanding.

The foreclosure rate on subprime fixed rate debt rose to 1.52% of loans outstanding. That was up by half from the quarterly running rate in early 2006 and the rate for the year jumped to 5.55%.There were 2.5 million of these loans outstanding last year. On variable rate subprime debt, however, foreclosures soared to 5.29% of loans outstanding from 4.72% during 3Q. Seventeen percent of these loans were foreclosed on last year and there were 2.9 million of these loans on the books.

By the country's regions the Northeast saw an increase in the overall rate of foreclosure to 2.29% last year from 1.59% during 2006. In the Midwest that rate rose to 3.44% from 2.71%. The West saw an increase to 2.68% of loans outstanding from 1.18% in 2006 and in the South foreclosures were started last year on 2.69% of loans versus 1.73% in 2006.

The Rise and Fall of Subprime Mortgages from the Federal Reserve Bank of Dallas can be found here.

These data series are available in Haver's MBAMTG database.

Mortgages in Foreclosure (%) 4Q '07 3Q '07 4Q '06 2007 2006 2005
All Mortgages 0.83 0.78 0.54 2.84 1.84 1.64
   Conventional Prime 0.41 0.37 0.24 1.30 0.77 0.72
     Fixed Rate 0.22 0.22 0.16 0.79 0.56 0.61
     ARM 1.06 1.02 0.41 3.23 1.19 0.75
   Subprime 3.44 3.12 2.00 11.71 7.23 5.66
     Fixed Rate 1.52 1.38 1.09 5.55 4.24 4.33
     ARM 5.29 4.72 2.70 17.08 8.80 6.07
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