More Homeowners Fall Behind in Mortgage Payments
According to USA Today, the Mortgage Bankers Association said that more homeowners with less than perfect credit are falling behind on their mortgage payments. This phenomenon is especially true in Ohio, Alabama, Tennessee, Michigan and West Virginia, where job losses have affected the local economies.
About 12.2 % of homeowners with sub-prime credit who pay high interest rates and have adjustable rate mortgages (ARMs) that reset to higher rates were late paying their loans in April through June, 2006, which was the highest level since 2003.
Furthermore, about 25% of all mortgages are ARMs, and more than half of those loans are to sub-prime borrowers. Accordingly, late payments are expected to rise through next year as ARMs reset to higher rates.
The Homeownership Preservation Foundation, which provides free credit counseling jumped by 25% in July 2006. More than half of the distressed callers had ARMs.
In Ohio, which has lost thousands of manufacturing jobs, the foreclosure process was already underway for 11% of homeowners with sub-prime ARMs, which is the nation's highest foreclosure rate.
In California, which had the nation's highest number of risky ARM loans, delinquency rates are still near historic lows.
Moreover, homeowners in Louisiana and Mississippi are still suffering from the financial aftermath of Hurricane Katrina. In these states, one of every four borrowers in those states with a sub-prime ARM was in default.