“Were it not for the increases in foreclosure starts in those four states, we would have seen a nationwide drop in the rate of foreclosure filings,” said Doug Duncan, the MBA’s chief economist

“Therefore, the problems in these states will continue, and they will continue to drive the national numbers, but they do not represent a national problem.”

California ground zero in mortgage mess
Pacific Business News (Honolulu) - September 7, 2007

California, the nation's largest mortgage market, is one of four states that are being blamed for pushing the national residential foreclosure rate to a record.

Nationally, foreclosures reached 5.12 percent of all loans outstanding in the second quarter on a seasonally adjusted basis, up 0.28 of a percentage point from the first quarter and up 0.73 of a percentage point from a year ago, according to figures released Thursday by the Mortgage Bankers Association.

The delinquency rate does not include loans in the process of foreclosure.

The rate of loans entering the foreclosure process was 0.65 percent on a seasonally adjusted basis, 0.07 of a percentage point higher than the previous quarter and up 0.22 of a percentage point from a year ago.

The second quarter's foreclosure starts rate is the highest in the association's history of the survey, with the previous high set in the prior quarter.

"What continues to drive the national, numbers, however, is what is happening in the states of California, Florida, Nevada and Arizona. Were it not for the increases in foreclosure starts in those four states, we would have seen a nationwide drop in the rate of foreclosure filings," said Doug Duncan, the MBA's chief economist.

California has 17 percent of the nation's subprime adjustable-rate mortgages and more than 19 percent of the foreclosure starts on these loans.

California, Florida, Nevada and Arizona have more than a third of the nation's subprime adjustable-rate mortgages and a third of the foreclosure starts for these loans.

Duncan notes that the four states have a disproportionately high share of investor loans or loans to buyers who do not plan to live in the houses. As of June 30, the non-owner-occupied share of loans in default -- 90 days or more past due -- was 32 percent in Nevada, 25 percent in Florida, 26 percent in Arizona and 21 percent in California. That compares with 13 percent for the rest of the nation.

"The problems in these states will continue, and they will continue to drive the national numbers," Duncan said. "But they do not represent a national problem."

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