A record 9 percent of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June, as damage from the housing crisis continues to mount, the Mortgage Bankers Association said Friday.
New foreclosures were concentrated in eight states: Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana and Ohio.
What's driving the delinquency rate up now is the number of homeowners with risky, adjustable-rate prime loans made with little or no proof of the borrowers' income or assets.
Many of these loans allowed the borrower to pay only the interest on the loan for a fixed period of time. Others gave borrower the option to "pick-a-payment," adding any unpaid interest to the principal balance.
More than one out of 10 borrowers with a prime adjustable-rate loan is now delinquent or in foreclosure. That portion, 11.3 percent, was up from 9.7 percent in the first quarter and is expected to continue to rise as more homeowners see their monthly payments spike.
Option ARMs and Liar Loans are going to drag everyone down. Just wait until the ride down hill really starts. We are in for a bumpy ride - downhill.