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Foreclosures at record high

Risky loans, marginal buyers drive rising delinquencies

By Steve Kerch, CBS.MarketWatch.com
Last Update: 6:26 PM ET Sept. 9, 2002

The mortgage delinquency rate -- the percent of homeowners at least 30 days behind on payments -- also rose in the quarter, the Mortgage Bankers Association of America reported Monday.

"There is an unprecedented amount of debt that people are putting on their houses," said Gary Gordon, a mortgage-finance analyst with UBS Warburg. "They are running down their savings. It's akin to taking money out of a 401(k) or borrowing against Social Security."

At the end of June, foreclosure proceedings were started on 0.4 percent of all mortgages and 1.23 percent of mortgages were somewhere in the process. Both figures, the highest since the MBA began tracking them in 1972, stem from the growth of low down-payment mortgages and loans to less creditworthy borrowers since the 1990-91 recession, experts said.

"The last decade has seen a lot of product innovation to produce new kinds of mortgages. These loans are getting stress tested under poor economic conditions for the first time," MBA Chief Economist Doug Duncan said.

http://www.marketwatch.com/news/yhoo/story.asp?guid=%7BBE730D6C-934F-406A-9847-35FDA571307E%7D&s...