The delinquency rate for mortgage loans in Utah, along with the number of loans slipping into foreclosure rose in the second quarter as more homeowners lost their jobs, the Mortgage Bankers Association said in a new report Thursday.

Of the 50 states surveyed, Utah ranked 33rd in delinquencies and 13th in foreclosures started in the second quarter. The worst of the foreclosure crisis is still concentrated in California, Nevada, Arizona and Florida, which accounted for 44 percent of new foreclosures in the nation this second quarter. Nearly 12 percent of all loans in Florida were in foreclosure, the highest in the country, followed by Nevada at 9 percent.

But loan delinquencies among borrowers with prime, fixed-rate mortgages grew from the first quarter to the second in all 50 states, with the biggest jumps in Utah, Wisconsin, Illinois and West Virginia.

In the second quarter, 9.7 percent of homeowners with a mortgage in Utah were behind on their payments and in foreclosure, compared with 5.6 percent a year ago. Nationally, a record 13.2 percent of homeowners were delinquent and in foreclosure.

Of a total of 435,419 mortgages surveyed in Utah this second quarter, 12,365 were in the foreclosure process, compared with 5,346 a year ago, the report said.

The foreclosure problem will persist until the job situation improves -- most likely by the middle of next year -- and more companies snap out of their cost-cutting mode, said John Mechem, associate vice president, public affairs with Mortgage Bankers.

"Nationally, we expect delinquencies to slow toward the middle of next year, and foreclosures to slow by the end of 2010," he said.

Fueling the foreclosure problem nationally and in Utah is a growing number of borrowers of prime fixed-rate loans -- traditionally the least risky because these are made to borrowers with good credit -- losing their jobs and having problems selling their homes because of declining property values, rather than shady subprime loans with adjustable rates that triggered the mortgage lending meltdown.

"That's a big problem because the vast majority of mortgage loans are prime-fixed loans, and foreclosures are rising in that area because of growing unemployment and lower property values, which are causing more mortgages to go underwater, and affecting homeowners' ability to sell their homes," Mechem said.

Of a total of 435,419 mortgages surveyed in Utah this second quarter, 273,411, or more than 60 percent, are prime fixed-rate loans, the report said. In Utah, the rate of prime fixed-rate loans entering foreclosure jumped to 35.7 percent in the second quarter, from 20.8 percent a year ago.

For the first time since the end of 2006, the percentage of subprime adjustable-rate loans entering into foreclosure fell to 5.8 percent in the second quarter, from 5.99 percent in the first quarter because many of those loans have already been modified. But Mechem said that rate is still up from 4.01 percent a year ago.

"The boom in subprime lending was from 2003 through 2005, and they started going bad from 2006 through 2008," he said. "Most subprime loans that go bad usually happen in the first two to three years of its origination, and then the likelihood of foreclosure drops. We've not had many subprime loans made in Utah in the past two and a half years."

Nationally, almost 21 percent of all prime adjustable-rate loans made to borrowers with mediocre or bad credit were past due or in foreclosure, compared with 11.3 percent a year ago. In Utah, 16.5 percent of prime adjustable-rate loans were delinquent and in foreclosure, compared with nearly 7 percent a year ago.

Related

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