WASHINGTON (AP) _ Late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit histories spiked to all-time highs in the first three months of this year.
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Thursday, reported that the percentage of payments that were 30 or more days past due for ``subprime'' adjustable-rate home mortgages jumped to 15.75% in the January-to-March quarter.
That was a sizable increase from the prior quarter's delinquency rate of 14.44% and was the highest on record, the association's chief economist Doug Duncan said in an interview with The Associated Press.
People who have taken out subprime mortgages, especially adjustable-rate loans, have been clobbered as rising interest rates and weak home prices have made it increasingly difficult for them to keep up with their monthly payments. Lenders in the subprime market have been hard hit, with some being forced out of business.
The percentage of subprime adjustable-rate mortgages that started the foreclosure process in the first quarter of this year climbed to 3.23%. That was up from 2.70% in the final quarter of 2006 and was the highest on record, Duncan said.
The first-quarter's increase in new foreclosures was mostly driven by problems in California, Florida, Nevada and Arizona, he said. In those four states, foreclosures are being ``heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes,'' Duncan explained.
Federal Reserve Chairman Ben Bernanke, in a speech last week, predicted there will be further increases in delinquencies and foreclosures this year and next as interest rates on many subprime adjustable-rate loans will go up as they reset.
Analysts estimate that nearly 2 million adjustable-rate mortgages will reset to higher rates this year and next. Some subprime borrowers were lured by an initially low ``teaser'' rates offered during the 5-year housing boom that ended in 2005. But those teaser rates can spike upward after the first few years, causing payment shocks.
Still, Bernanke said it was unlikely that troubles in the subprime mortgage market would seriously spill over to the broader economy or the financial system.
Loose lending standards, including allowing borrowers to get mortgages with little documentation, contributed to problems in the subprime market, Bernanke said. Congress is looking into possible action. Bernanke, meanwhile, has said the Fed will consider tougher rules to curb abusive practices and improve disclosure.
``In doing so, however, we must walk a fine line,'' said Fed Governor Randall Kroszner, who was presiding over a public hearing Thursday on the matter. ``We must determine how we can help to weed out abuses while also preserving incentives for responsible lenders,'' he said.
For all mortgages, the delinquency rate actually dipped to 4.84% in the first quarter, an improvement from the fourth quarter's rate of 4.95%, which had marked a 3 1/2 year high. However, the number of all mortgages starting the foreclosure process in the first quarter rose to a record high of 0.58%. That surpassed the previous high of 0.54% in the final quarter of 2006.
The association's survey covers a total of nearly 44 million loans nationwide.
Wall Street was jarred when the association's previous report in March showed surging delinquencies and new foreclosures in the final quarter of last year. The Dow Jones industrials tumbled that day nearly 243 points.
The subprime meltdown began in February, when New Century Financial Corp. and HSBC Holdings reported more borrowers missing payments. The spike in bad loans scared banks and investors away from risky debt, drying up much of the industry's financing. More than 30 subprime lenders, including New Century, have gone bankrupt this year.
With the hope that subprime problems eventually will be worked through and won't infect the overall mortgage market, Duncan said: ``We're just urging people to take a deep breath and look at the big picture.''