By Chris H. Sieroty

California and three other states continue to account for almost half of the foreclosures starts in the nation, according to the Mortgage Bankers Association.

In its report released Thursday, the trade association reported that foreclosures were at record levels, with 1.37 percent of all home loans nationally starting the foreclosure process in the first quarter of 2009. This was a 29 basis point increase over the fourth quarter of 2008 and a 36 basis point increase from one year ago.  Both the level of foreclosures started and the size of the quarter over quarter increase are record highs.

In California, Florida, Nevada and Arizona the rate of homes entering foreclosures was 2.45 percent, the report found.

“Those states continue to account for about 46 percent of the foreclosure starts in the country, and represented 56 percent of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts,” said Jay Brinkmann, MBA’s chief economist. “It is difficult to overstate the severe impact home price declines have had on mortgage performance in those four states.”

Brinkmann said absent those four states, the national foreclosure rate would have been 1.01 percent.

“The increase in the foreclosure number is sobering but not unexpected,” Brinkmann said in a release. “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.”  

Brinkmann didn’t expect the mortgage default rates to begin to decline until after the employment situation in California and nationally begins to improve. The MBA’s forecast is that the unemployment rate will not hit its peak until mid-2010.

“Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after that,” said Brinkmann.

If there is any good news in the MBA’s report, it’s that California is not the worst state nationally in terms of foreclosures. That distinction belongs to Florida, where 10.6 percent of mortgages are somewhere in the process of foreclosure, followed by Nevada, 7.5 percent, Arizona, 5.6 percent, and California, 5.2 percent.



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