Houston Area late mortgage payments on rise

May 4, 2007

Late mortgage payments rise
Figures indicate foreclosures likely to increase for Houston homeowners

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 loans

In 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 borrowers

Though 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."

purva.patel@chron.com


VOICES OF HOUSTON
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Tip of the real estate iceberg problems are starting to be realized. Overpriced properties were sold to clueless buyers with financing schemes with "baloon" payments. Couple that with the current cost of living expenses especially fuel and you have lots more defaults in the offing. The good news is that the Mayor's daughter got off her DWI charge and we now have red light cameras instead of a real and viable mass transportation system. Most of these folks would be able to live and pay for these homes if they were not paying so much for gas. Thanks City leaders for giving us so many transportation alternatives.....cars, cars, cars and more cars.
5/4/2007 7:48:45 AM
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This is what many of us thought we would see, A repeat from 1982 - 1989.
Many are afraid this is the beginning of a bad recession to come very soon.
One good thing people are seeing prices drop like they have not in years becasue people can not keep paying double the amount for everything like food and gas to name a few things. In other words middle class america is getting hit hard and if it keeps going like this for much longer there is going to be serious trouble in the near future. The real facts are starting to come out in the public eye. By talking to many people on the streets they are all talking about moving out of the area after schoolends. My question to all is where is the gold rush. The same thing is going on in many of the mojor cities in the usa.
5/4/2007 9:04:02 AM
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All I want to know is whether home prices will be going down at a faster rate now?


5/4/2007 9:25:53 AM
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Them ARMs are coming back to bite alot of peoples.
5/4/2007 10:05:02 AM
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PeskyP wrote:
The irony is that whenever the subprime loans started getting foreclosed on, a lot of longtime mortgage people lost their jobs. Lesson to be learned here is, if you think you need a 250,000 dollar home and you only make 30,000 a year - don't even think about it. More trouble than it is worth.
5/4/2007 11:07:27 AM
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enough001 wrote:
Won't happen don't you hear all over TV and radio bad credit ok we will get you in a house the bank are protected by the government which is protected by the tax payer.
5/4/2007 11:34:41 AM
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JRandTim wrote:
I think it should be noted that there ARE parts of the houston area that are not suffering. The housing bubble hasn't burst for everyone. I live in Galveston County (Texas City) where there is still a tremendous housing boom and the values of homes are still climbing.
5/4/2007 11:52:39 AM
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droxford wrote:
The average American household is saddled with heavy credit card and installment debt, driving many into bankruptcy. The habits of foolish spending and lack of saving will come back to bite Americans.
5/4/2007 12:57:10 PM
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SFW wrote:
Adding to the complication of bankruptcy are new laws, in which you don't really have an option of bankruptcy. You will not be forgiven all of your debts, but the banks are still free to smack you down with outrageous fees and penalties, because Usury laws can't be enforced. All banking institutions moved operations to states that have little or no usury laws and those states laws apply to you, no matter where you live. As for "some areas" still in a boom, they might be building the houses, but we will see how much they can really sell them for. I don't believe that there is a housing shortage in the Houston area anymore.
5/4/2007 1:16:24 PM
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lone wrote:
i don't know anything about the mortgage industry or anything related to it. But i can honestly say i saw this coming a few years back, in my neighborhood (which has been established for about thirty years now )they started building and over abundance of these'cheap'homes and the advertising to get into them read "bad credit ok" why in the world would you invest in a home you know you may not be able to afford or keep?? to me this is a common sense issue, duh! most of the American people are living off credit cards, quit it.

Read More: Purva Patel, HOUSTON CHRONICLE

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