US foreclosures hit 'record high'

Mortage Bankers Association report is a new blow to the struggling US economy.

    Morgan Stanley was among the US banks that posted huge losses due to the subprime crisis [AFP]

    For subprime mortgage loans, the rate of those who fell behind on their payments rose a full percentage point to 17.31 per cent from the previous quarter of 2007.
     
    Doug Duncan, chief economist at the Mortage Bankers Association, said: "Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state."
     
    Separately, the US Federal Reserve said on Thursday that the net wealth of US households had fallen for the first time in five years in the same period as the value of real-estate holdings and stocks declined.
     
    Billions lost
     
    US banks have reported losses of tens of billions of dollars after offering loans that were not repaid.
     
    The crisis has also affected international lenders who bought into or offered subprime loans in the US and contributed to bouts of chaos on international financial markets.
     
    The association's survey covers almost 46 million home loans across the US.
     
    The worsening foreclosure and late payment figures come as fears grow that the country is on the edge of a recession or in one already.
     
    The US government has developed a number of plans to delay foreclosure proceedings but has faced criticism for not acting quickly enough to aid those affected.
     
    Quick foreclosures
     
    Mortgage lenders have also been accused of moving too quickly to foreclose on people's homes.
     
    The wave of foreclosures threatens to deepen the already severely depressed housing market.
     
    The homes people are forced out of add to the glut of unsold homes already on the market.
     
    That has forced even more cutbacks by homebuilders, slowing economic activity.

    SOURCE: Agencies


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