>>More Falling Behind on Mortgage Payments
By DAVID LEONHARDT
With energy costs and unemployment rising, the number of Americans who are behind on their mortgage payments
has increased sharply in the last year.
The increase is particularly worrisome, housing analysts say, because it suggests that many of the new homeowners, who
were part of a surge in house-buying during the last decade, may not be able to afford their current mortgages during slow
economic times. Newly liberal lending standards, which often require only a small down payment, have in recent years
allowed many people to buy their first house.
Over the last year, however, a growing minority of those homeowners have struggled to pay their bills.
In a popular government-insured program to help people buy moderately priced homes, the percentage of homeowners
whose loan payments are more than 30 days late exceeded 10 percent for the first time ever at the end of last year,
according to a survey by the Mortgage Bankers Association of America. Even during the recessions of the early 1990's and
the early 1980's, the rate did not exceed 8 percent.
Over all, about 400,000 more families were at least 30 days late on their mortgages in the early months of this year than at
the beginning of 2000.
Those statistics do not include "subprime" mortgages — which generally go to people with low income or a spotty credit
history — and delinquencies among those homeowners have risen in the last 18 months, too, according to the Mortgage
Information Corporation in San Francisco. Despite the wider availability of mortgages in recent years, subprime loans
remain one of the only options for many minorities, studies have shown.
Foreclosure rates, which typically lag delinquency rates, remain low, but have increased slightly this year.
For the people who have been unable to pay their bills, the last few months have been a terrifying time, they said, in which
they have begun to feel unsettled in the one place where they would expect to find solace: their home.
"Never did I imagine I would be in a situation like this," said Alice F. Camp, who lives with her husband and three children
in a two-story house — the first she has owned — near Atlanta. Last year, Mrs. Camp lost her job as a nurse shortly
before learning she was pregnant, and the Camps quickly fell behind on their monthly payments of about $750. Their bank
has threatened foreclosure twice this year.
"I've always been able to pay my bills, but I've just been kind of helpless," she said. "It's just been devastating."
The mortgage problems underscore one main reason many policy makers and economists are so concerned about whether
the United States will enter a recession this year. In recent years, Americans have built up hundreds of billions of dollars of
debt, and should the current slowdown worsen, many people could find themselves unable to pay their credit card, auto
loan and mortgage bills, analysts say. Even those better positioned to ride out a downturn may be forced to cut back on
spending to pay down debt, further weakening the economy.
The expansion of mortgage lending has happened as the federal government has pressed banks to make more loans
available in poorer communities. On their own, bankers have also begun using sophisticated computer programs to identify
new groups of potential homebuyers.
Between 1995 and the start of this year, the home ownership rate rose to a record 67.5 percent from 64.7 percent,
according to the Department of Housing and Urban Development. Between 1982 and 1995, it had fallen by a tenth of a
percentage point.
But now, with companies eliminating jobs and overtime hours and with the costs of gasoline, heating and air- conditioning
up sharply, many people who only recently grabbed onto the ladder to the middle class are struggling to hang on.
"This is the first time these loans have been tested," said Mark Zandi, an economist at Economy.com, a forecasting firm in
West Chester, Pa. "The pace at which things have eroded reveals severe stress."
The level of delinquencies among the mortgages insured by the Federal Housing Administration is "outrageous," added
Mark P. Vitner, an economist at First Union in Charlotte, N.C. Mr. Vitner said that banks would probably become stricter
about lending if it remained as high as 10 percent. "It is a very disturbing trend," he said. <<
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