More Homeowners Face Mortgage Woes

(MoneyWatch)  Growing numbers of Americans are falling behind on their home loans, a bad sign for the housing sector, banks and the broader U.S. economy.

As of the end of September, a record 14.4 percent of people with mortgages were in foreclosure or at least one payment past due, according to a new survey by the Mortgage Bankers Association. Rising foreclosures hurts home prices, which in turn flips more homeowners upside down on their loans.

The storm is now squarely over prime borrowers, rather than individuals with weaker credit. Fully one-third of all foreclosures started in the third quarter involved homeowners with prime fixed-rate loans, the largest share among borrowers. By contrast, foreclosures are dipping for mortgage holders with both fixed and adjustable subprime loans.

The main problem now is jobs, job, jobs.

"The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve," said MBA chief economist Jay Brinkmann. "First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace. Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates."