Home Defaults Up 22% from Last Month
According to monthly data from Washington-based Mortgage Insurance Companies of America, defaults by U.S. homeowners with private mortgage insurance jumped by 22 percent last month after house prices fell the most in at least six years.
The number of insured borrowers falling more than 60 days behind on their payments climbed to 54,699 in September from 44,791 a year earlier, according to the report The defaults represented a 4.9 percent increase from a revised August number, while 2.9 percent fewer loans returned to good standing.
A surge in home foreclosures is draining profit at mortgage lenders and insurers including MGIC Investment Corp., the biggest, and No. 2 PMI Group Inc., which this month reported their first quarterly losses as public companies. Borrowers who don't have a 20 percent down payment often must buy the insurance, adding to their monthly costs, to protect lenders from losses if they default.
“Things are going from bad to worse,'' said Ajay Rajadhyaksha, head of fixed-income strategy in New York at Barclays Capital Inc. “Overleveraged borrowers are meeting falling home prices.''
Home prices in 20 U.S. metropolitan areas dropped 4.4 percent in the 12 months that ended August, the most since 2001, according to data from the S&P/Case-Shiller home-price index. Falling home prices make it harder for borrowers to refinance and for lenders to recover their loans in a foreclosure.
Published on November 1, 2007
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