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Foreclosures Fall, But Early Delinquencies Rise - U.s.

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The foreclosure crisis might have finally peaked in the first half of this year, but with the continued weakness in the economy and the recent deterioration of the housing market, the gains may prove fleeting.

For the first time since 2006, the number of loans in the process of foreclosure fell in the second quarter, the Mortgage Bankers Association said Thursday. Some other measures of delinquency also dropped.

But the group’s chief economist, Jay Brinkmann, said in a news briefing that it was premature to conclude the improvements would persist. “It’s more of a hope than anything at this point,” he said.

The problem is no longer high-interest subprime loans, many of which have worked their way out of the system. The critical area now is prime loans, where defaults are driven by stubbornly high unemployment.

“It takes a paycheck to make a mortgage payment,” Mr. Brinkmann said.

Mortgages that are in serious default, which means at least 90 days past due, fell to 9.11 percent of all loans from 9.54 percent in the first quarter, the banking association said. The peak was 9.67 percent in the fourth quarter of 2009.

The percentage of loans moving from default to full-fledged foreclosure also dropped in the second quarter.

This rare good news coincides with a time when forecasts for housing are bleak. Sales of existing homes in July fell by 26 percent from the same month last year. Sales of newly built homes dropped during the month by 32 percent from 2009. It was the slowest July for new homes in records stretching back to 1963.

Both reports, released this week, were much weaker than anticipated, and presage an autumn and winter of falling prices.

Paul Dales, an economist with Capital Economics, said the situation remained critical and the implications significant.

“Up to four million households could still lose their home,” Mr. Dales wrote Thursday in a note to clients. “Aside from the considerable social costs, this does not bode well for consumer spending, bank profits or the housing market itself.”

Still it's contained....

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  • 429 Brexit, House prices and Summer 2020

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