A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.
Driven by rising unemployment, such loans accounted for nearly one-third of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.
At the same time, the proportion of home-owners with a mortgage who were either behind on their payments or in foreclosure hit a record high for the ninth straight quarter.
The Mortgage Bankers Association's report that was released yesterday suggests that the housing market and the broader recovery are under pressure from the surge in home-loan defaults, especially as unemployment continues to rise. Lost jobs are now the main reason that homeowners fall behind on mortgages.
After three years of plunging prices, the housing market started to rebound this summer. But analysts say that there are too many foreclosed properties that have yet to be dumped on the market.
About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if one-fourth of those borrowers are able to stay in their homes, "there's a lot of potential inventory coming into the market next year," said Jay Brinkmann, the chief economist with the Mortgage Bankers Association.
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