More foreclosure risk, more pain

WASHINGTON -- The number of Americans at risk of foreclosure is rising, reflecting the U.S. economy's continued struggles.

The Mortgage Bankers Association said Monday that 8.44 percent of homeowners missed at least one mortgage payment in the April-June quarter. That figure, which is adjusted for seasonal factors, rose 0.12 percentage points from the January-March period.

In a normal market, the percentage of delinquent borrowers is about 1.1 percent, according to the trade group.

Delinquent mortgages have plummeted from a record high of more than 10 percent of residential mortgages a year ago. But the decline is due partly to delays in foreclosure filings that are backlogged in several state courts, including Florida, New Jersey, Illinois and New York.

The end of a state and federal investigation into faulty foreclosure paperwork will likely lead to increased foreclosures later this year.

Analysts say the increase is especially worrisome because it's due mainly to high unemployment, which tends to raise the number of missed payments and foreclosures over time. And once delayed foreclosures are restarted, the economy could suffer a hit.

"The current processing delays mean this will not happen quickly, underlining our view that both the housing market and the economy will remain weak for a few years," Capital Economics senior U.S. economist Paul Dales said.

The quarterly survey covers nearly 88 percent of primary residential mortgages totaling nearly 44 million loans.

Anthony Martin, principal of LV Default, said he's seen notices of default increase from about 80 a day to 150 a day in the last couple of months, even though July's notice-of-default count of 2,460 was down from 4,761 in the same month a year ago. It was the fourth straight month with fewer than 2,600 notices of default.

The numbers dipped because of legislation aimed at ensuring that banks have proper documentation to initiate foreclosure, Martin said. Most people know when they're behind on payments, and will plan accordingly, he said.

"We're definitely seeing more and more people opting to leave the property," said Martin, who tracks foreclosure data in Las Vegas and buys homes at trustee auctions. "We're discovering more vacant homes when we get there. Most people haven't made a payment for many months, so people are making a conscious decision to walk away."

The "strategic default" phenomenon has proliferated in Las Vegas, where some 80 percent of homeowners with a mortgage have negative equity in their homes.

Las Vegas Review-Journal reporter Hubble Smith contributed to this report.