Arizona Mortgage Payments Prove Problematic: More Owners Falling Behind
The number of Arizona mortgage holders behind on payments and in danger of losing their homes is at a two-year high … and it’s expected to keep climbing.
Many owners staved off foreclosure a few years ago by home mortgage refinancing to more risky adjustable-rate mortgages with lower monthly payments. But now, those borrowers, and the many investors who used the same mortgages to buy multiple houses, are struggling to hold on as their payments begin to increase.
Across the Arizona housing market, 3.51 percent of homeowners are at least one month behind on their home loan payments, according to the Mortgage Bankers Association’s quarterly snapshot of the housing market. The figures are for the last three months of 2006.
The picture isn’t as bleak here as in other parts of the country. Nationally, the percentage of late mortgage payments hit 4.95 percent, a 3 1/2 -year high. Foreclosures hit an all-time high of 0.54 percent.
Mississippi, Louisiana and the Michigan housing market led the nation in delinquencies. Arizona was 40th.
The Valley’s housing boom in 2004 and 2005 bailed out a lot of struggling homeowners. A 50 percent spike in home values and an overheated market helped people who had fallen behind on their mortgages to sell quickly before their home loan lenders foreclosed.
Other homeowners were able to tap the rising equity in their houses to refinance and catch up on payments. But some who refinanced used more risky adjustable-rate mortgages. Most of those loans were subprime, meaning the borrower had bad credit and the interest rates and fees were higher. Now, adjustable-rate payments are rising, but owners’ home equity and salaries aren’t keeping pace.
“We’ve just started to see the head of the monster,” said Margie O’Campo de Castillo of Arizona Dream Realty. “There were a lot of three-year, adjustable-rate mortgages done to buy Valley homes or refinance in 2004 and 2005. Payments on those loans are about to start rising. More foreclosures will follow.”
Foreclosures have been steadily rising in both the Phoenix housing market and Arizona since last summer but aren’t near the highs of the late 1980s, when the real estate market crashed. The Mortgage Bankers Association tracked 0.42 percent of Arizona home loans in foreclosure at the end of 2006.
Doug Duncan, chief economist for the association, said the rise in delinquencies and foreclosures across the country was expected because of the housing market slowdown. How quickly the market rebounds depends on how deep the problems in the subprime mortgage market turn out to be, economists say.
The delinquency rates on subprime mortgage payments are much higher than the overall rate.
In Arizona, about 9.2 percent of borrowers with subprime loans are behind on their mortgage payment. The U.S. delinquency rate for subprime mortgages is 13.3 percent. Subprime loans are a big concern on Wall Street now as more of these lenders announce losses from writing off bad loans.
“There will be some pain,” said Terry Turk, president of Mesa-based Sun American Mortgage. “A lot of people are shaking their heads at the subprime loans out there. But Phoenix’s continued growth should help it fare better than other parts of the country.
SOURCE: The Arizona Republic