Houston Area late mortgage payments on rise
Late mortgage payments rise
Figures indicate foreclosures likely to increase for Houston homeowners
Copyright 2007 Houston Chronicle
Area homeowners are increasingly having trouble making their mortgage payments, signaling foreclosures will likely continue to mount.
In the Houston area, 4.38 percent of loans were 30 or more days late during the first quarter of 2007, compared with 2.04 percent during the same period last year, according to data provided by Moody's Economy.com.
Nationally, the first-quarter rate for payments that were a month or more late was 2.96 percent.
"We know the foreclosure rates have been rising for the last three years, so that's not a surprise," said Barton Smith, a University of Houston professor of economics. "We don't see the end of this mess until at least the end of this year or maybe next year."
Smith said the numbers are in sync with national trends of rising foreclosures and increasing defaults on loans made to those with poor credit.
Foreclosures shot up to 11,983 in 2006 from 8,300 in 2004, in Harris, Montgomery and Fort Bend counties.
The Houston-Sugar Land-Baytown area ranked fourth behind the Detroit, Miami and Riverside, Calif., metro areas in terms of delinquencies of 30 days or more.
The Detroit area, which had the highest total delinquency rate, was dramatically affected by the auto industry's slump.
Subprime loansIn Houston, analysts credit the rise in late payments to the fallout of Hurricane Katrina and the unaffordability of risky, high interest or exotic mortgages known as subprime loans.
Houston's figures were likely skewed by an influx of Katrina evacuees in 2005, said Rakesh Shankar, senior economist at Moody's Economy.com.
After the storm, the area actually saw a drop in delinquency rates as lenders forgave and postponed debt for many who were displaced by Katrina and bought homes here. But in recent quarters, those loans are back in play, he said.
"A lot is related to the storm," Shankar said. "If you look at the fundamentals in the economy, the Houston market really is not as bad."
Still, he noted, Houston has not escaped the effect of subprime lending problems or a slowdown in building.
"We'll see more slowing," he said. "Part of that really is Katrina-related, and part of it is the national economy is slowing. And credit lending is tight."
Helping borrowersThough Houston ranked high among those with mortgage payments more than 30 days late, it fares better when ranked by the percentage of loans that are 90 days or more delinquent. With 0.36 percent of loans 90 or more days late, Houston fell to the 10th spot. That compares to the national rate of 0.27 percent.
It's uncertain why, but some experts suggested that lenders may be working with financially strapped subprime borrowers before things get out of hand.
Some lenders may be renegotiating loans or allowing "short sales," where the borrower sells the house for less than the outstanding loan amount and gives the proceeds to the lender.
But there's no way to gauge if lenders are doing that more in Houston than other areas.
Ben Streusand, president of the Texas Mortgage Bankers Association, said the city, as well as Texas, will likely not experience as bad a slowdown in housing sales or as large a drop in prices in California or Florida because this area hasn't seen the rocketing price appreciations that those states have had.
"There's almost a direct correlation between price appreciation and subsequent depreciation and delinquency rates," said Streusand, who is also head of the Houston-based Home Loan Corp. "I would be concerned somewhat if we start to have big gaping gains in appreciation over the next two or three years, because we could be setting up for the corollary scenario you're seeing in other parts of the country."
Read More: Purva Patel, HOUSTON CHRONICLE