The deepening sub-prime home mortgage crisis was underscored by the Mortgage Bankers Association’s yesterday when the MBA reported that the percentage of payments 30 or more days past due for sub-prime adjustable-rate home mortgages have risen 1.31-percent in the first quarter of 2007.
That’s an increase to 15.75-percent from the 14.44-percent delinquency rate of last quarter, a “sizable increase” according to Doug Duncan, the MBA’s chief economist.
Federal Reserve Chairman Ben Bernanke foresees further increases in delinquencies and foreclosures for at least a year into the future.
This striking jump in delinquencies is combined with equally high foreclosure numbers. The share of mortgages that are at some point in the foreclosure process increased by 1.28 percent—the highest rate since the first quarter of 2004, and the fourth quarter in a row with an increasing share of mortgages in foreclosure.
What’s more, the share of mortgages that started the foreclosure process increased to 0.58 percent in the first quarter of 2007. This is the largest share of mortgages entering foreclosures in a given quarter, the first time on record that this ratio has increased for four quarters in a row, and the largest four-quarter increase on record.
Clearly action is needed to help homeowners who have sub-prime mortgages find some financial relief. The Center for American Progress is proud to be part of that effort.
Following our March release of our report From Boom to Bust: Helping Families Prepare for the Rise in Subprime Mortgage Foreclosures, which predicted the present conditions of the failed housing market and prescribed federal policies to reduce the impact of negative consequences, members of the House and Senate turned to the report for policy guidance. Among our recommendations:
- Provide federal grants to expand and enhance current mortgage assistance and foreclosure prevention programs and low-interest mortgage assistance to eligible borrowers.
- Allot federal funds to target key cities and states facing the highest risk of mass foreclosure.
- Include provisions to ensure federal agencies assess the effectiveness of each program every three years.
- Strengthen programs that aid families while their mortgage contracts are renegotiated or the property is sold on the market so that the homeowners’ credit ratings are salvaged, allowing for the possibility of future homeownership.
A number of members of Congress see the merits in several of our proposals. Sen. Jack Reed (D-RI), for example, has introduced legislation that would provide better federal housing assistance to low and moderate income families. Similar legislation in the House is under consideration. Separately, Sen. Charles Schumer (D-NY) has proposed a $300 million emergency foreclosure workout plan.
The Center applauds these legislative moves and looks forward to our complete set of recommendations being adopted by the full Congress later this year.
For more information on the Center’s policies and research on the housing market, see: