A 50 percent jump predicted for fiscal 2008; First State’s mortgage mess reflects U.S. trend.
Foreclosure filings in Delaware rose 38 percent in July over last year, and experts say those numbers are likely to get worse, providing another sign that troubles in the subprime mortgage market will continue.
Although filings for all three counties in Delaware fell in July from the previous month, they were up year-over-year in July by 34 percent in New Castle County, 43 percent in Kent County and 54 percent in Sussex county.
Gerry Kelly, Delaware’s deputy bank commissioner for consumer affairs, expects the total number of foreclosure filings in Delaware to go up 50 percent in fiscal year 2008 from the 2,962 foreclosures recorded in fiscal 2007.
The numbers mirror a national trend that has riled the stock market in recent weeks. According to national numbers, the percentage of subprime loans that were 30 or more days past due climbed to 15.75 percent in the first three months of this year, a record high that has reverberated through other parts of the financial sector and led to a stock sell-off. Falling more than 200 points Tuesday, the Dow Jones Industrial Average is nearing a dip below the 13,000 mark, a psychological barrier it crossed in early spring.
“Mounting mortgage delinquencies and defaults now pose the most serious threat to the global financial system and economy,” said a July 2007 report by Moody’s Economy.com. “Our forecast indicates that the mortgage delinquency rate will peak at a record 3.6 percent next summer, with some 2.5 million first-mortgage loan defaults expected over the next two years.”
Moody’s estimates 17 percent of mortgage debt outstanding — about $1.4 trillion worth of mortgages nationwide — is at high risk of delinquency or default.
The biggest problem lies in nontraditional adjustable rate mortgages, which are due to reset in the coming months. Many homebuyers who took out such loans a few years ago planned to re-finance before rates reset and monthly payments went up. But today, homeowners are finding it difficult to refinance because banks have tightened lending standards, especially for borrowers with poor credit.
“The problem is, if [banks] withdraw credit at the time of resets, what are these people going to do?” said Kelly. “A lot of people could lose their homes.”
The Office of the State Bank Commissioner is sponsoring a week of foreclosure prevention activities next month, kicking off with a conference Sept. 19 in Dover.