Our Fabulous Economy

The number of Americans who fell behind on their mortgage payments rose to a 20-year high in the third quarter as borrowers were unable to refinance or sell their homes.

The share of all home loans with payments more than 30 days late, including prime and fixed-rate loans, rose to a seasonally adjusted 5.59 percent, the highest since 1986, the Mortgage Bankers Association said in a report today. New foreclosures hit an all-time high for the second consecutive quarter in a survey that goes back to 1972.

The surge in foreclosures is expanding the inventory of unsold homes and contributing to the decline in housing demand. Sales of new and previously owned homes probably will drop to 5.09 million next year, 32 percent below the 2005 peak of 7.46 million, according to Frank Nothaft, chief economist of Freddie Mac, the second largest U.S. mortgage buyer. About 40 percent of lenders have increased standards for their most creditworthy borrowers, according to a Federal Reserve study in October.

``These are the first numbers we've seen that combine the meltdown of the credit markets with the drop in home prices,'' said Jay Brinkmann, vice president of research and economics for the Washington-based bankers trade group.

Bush Plan

President George W. Bush and U.S. Treasury Secretary Henry Paulson today announced a freeze on some subprime home-loan rates aimed at helping borrowers who can't afford their mortgages after they reset higher from low starter rates.

The agreement also allows some borrowers to refinance into a new private mortgage or obtain a loan backed by the Federal Housing Administration.

As the U.S. housing slump enters its third year, investors are shunning securities backed by mortgages, the top 15 U.S. home builders have lost about $35 billion in market value this year, and the inventory of unsold houses has risen to almost an 11-month supply, the highest in 22 years.

One in every five adjustable-rate subprime loans had late payments in the quarter, a number that excludes the one of every 10 already in foreclosure, the bankers group said in their report. Foreclosures started on all types of mortgages rose to an all-time high of 0.78 percent from 0.65 percent.

In the quarter, 3.12 percent of prime borrowers made their mortgage payments at least 30 days late, up from 2.73 percent in the second quarter, the report said. The subprime share of late payments rose to 16.3 percent from 14.8 percent.

California, Florida Lead

The numbers were driven by California, the U.S.'s largest state, and Florida, Brinkmann said. The two states had 36.4 percent of all of the nation's prime adjustable-rate loans and had 42.4 percent of new foreclosures during the quarter, he said. They had 28.1 percent of subprime adjustable mortgages and 33.7 percent of foreclosure starts for that type of loan.

Sixty percent of banks said they tightened qualifications for in October for so-called non-traditional mortgages such as interest-only loans, the Fed said.

Housing permits in the U.S. have declined for five consecutive months, falling to a 14-year low of 1.178 million at an annual pace in October, the Commerce Department said in a Nov. 20 report.

Sales of previously owned homes fell to a rate of 4.97 million that month, the lowest in a study that goes back to 1999, the National Association of Realtors said Nov. 28. The inventory of single-family homes for sale increased to a 10.5 months' supply, the highest since July 1985.

Toll's Loss

The U.S. asset-backed commercial paper market has shrunk $394 billion, or 33 percent, since August. Debt maturing in 270 days or less and backed by mortgages, credit-card loans and other holdings fell $23 billion, or 2.8 percent, to a seasonally adjusted $801.2 billion for the week ended Dec. 5, the Federal Reserve in Washington said today.

Toll Brothers Inc., the largest U.S. luxury-home builder, today reported its first quarterly loss in 21 years as fiscal fourth quarter revenue slid 35 percent from a year ago to $1.17 billion. Net income for the full fiscal year plunged 95 percent to $35.7 million, the lowest since 1993.

The Mortgage Bankers report is based on a survey of 45.4 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.

Link.

But as noted in an earlier post, Beloved Leader has a plan. This is what it will do if it works as planned by the mortgage industry, per Atrios:

CNN's telling me what the great mortgage rate freeze program will do.

People who qualify:

have an income and live in their homes
are currently making their payments on time
would default if their interest went up

Also:

ARM mortgage has to have been taken between 1/05 and 7/7
Has a rate reset between 1/8-1/10
And you don't qualify if:

have missed payment
can afford mortgage rate increase
don't have an income
own homes which are worth less than their mortgage
The last one is the kicker, as it kicks out the class of people who might actually be able to refinance on their own.

I became increasingly skeptical that such a broad-based bailout would be workable for various reasons, but as is usually the case with anything the Bush administration gets involved in, they aren't even really trying.