Mortgage Defaults Hitting Record Highs

More bad news for the housing market, the number of people falling behind on their mortgage payments continues to climb. The Mortgage Bankers Association says 9.64 percent of all home loans outstanding last quarter were at least one payment past due. What's worse? That figure does not include loans that are in the process of foreclosure, 4.47 percent of loans were in foreclosure, up from 4.3 percent last quarter.

Prime fixed-rate loans have been hit the hardest. The MBA says 33 percent of foreclosures started in the third quarter were prime fixed-rate and that number is expected to increase next quarter. These type of loans make up nearly 50 percent of loans 90 days or more past due but not yet in foreclosure.

Not surprisingly, the MBA's Chief Economist, Jay Brinkmann, credits the climbing delinquencies to job losses:

"Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent."

Ironically, the increasing rate of defaults has provided growth in one corner of the job market, the mortgage restructuring business. The Wall Street Journal (subs req'd) reports that four of the largest mortgage services have collectively hired almost 17,000 people this year and plan to keep adding staff.