Fewer Arizona Mortgage Problems Reported

The number of Arizona home mortgage payment problems fell during the first fiscal quarter, a sign the housing market may be on the rebound.

Mortgage delinquencies across the state dropped to 3 percent at the end of March from 3.51 percent at the end of 2006, according to the Mortgage Bankers Association of America.

Nationally, the delinquency rate fell to 4.84 percent from 4.95 percent.

Delinquencies are a leading indicator of foreclosures.

The drop could mean fewer people in the Grand Canyon State are likely to lose their homes next year as long as the rate of people behind on their Arizona home loan payments continues to dip.

“It’s one less black cloud over the Phoenix housing market,” Jay Butler, director of realty studies at Arizona State University’s Morrison School, said.

“But it will take a couple of quarters of lower default rates and inventories of homes for sale to see if the market is turning.”

The falling rates could be attributed to Arizona mortgage bankers working with borrowers instead of taking back homes they can’t sell for a profit.

Another reason could be that more borrowers are lowering their payments by refinancing out of adjustable-rate or bad credit mortgage products.

Although Arizona’s delinquency rate is down, its spike in foreclosures during the past year has put it among the top five states for increases in the number of people actually losing their homes.

The same states that led the nation for price run-ups, bad credit home loans and speculator buying sprees a few year ago - California, Nevada, Florida and Arizona - now lead the country in new foreclosures.

Doug Duncan, chief economist for the Mortgage Bankers, said foreclosures nationally would have dropped if these states hadn’t posted big gains.

Arizona’s foreclosure rate climbed from 0.76 percent of all loans at the end of 2006 to 0.95 percent of all loans at the end of March.

The state’s overall rate of delinquency in home loans is still low compared with the rest of the country, but the recent increase signals several more thousand people are about to lose their homes.

Speculators, who bought multiple properties, often using more risky ARMs and bad credit home loans, are driving the recent bump in metro Phoenix home loan foreclosures.

At least 25 percent of all Valley homes to fall into foreclosure this year are owned by investors, according to an Arizona Republic analysis.

A mortgage company can move to foreclosure on a property after a borrower has missed only one payment. Many lenders wait at least three months to ascertain whether struggling homeowners can catch up.

Market watchers believe that, besides speculators, many Arizona homeowners facing foreclosure either paid more than they could afford or took out an ARM, betting their incomes or home values would rise.

“Even though the job market in metro Phoenix is good and real incomes are going up for many, some people made bad moves in the housing market and are paying the price now,” said Elliott Pollack, an Arizona economist and real estate investor.

He said that as those troubled speculators and homeowners either sell, apply for mortgage refinancing or lose their properties, delinquencies will fall and then foreclosures will follow.

SOURCE: Arizona Republic