You have to remember that this is going on when interest rates are about a percent above historic lows.

We have a crash, the only question is when it becomes a panic.

Foreclosure Rate Hits Historic High

By Dina ElBoghdady and Nancy Trejos
Washington Post Staff Writers
Friday, June 15, 2007; D01

The percentage of U.S. mortgages entering foreclosure in the first three months of the year was the highest in more than 50 years, according to the Mortgage Bankers Association.

As the association released its numbers, the Federal Reserve held a hearing to determine whether regulators could do anything to crack down on abusive lending practices, which have exacerbated the problem

The problems arose last year as the housing market softened, driving down home prices and making it more difficult for cash-strapped borrowers to sell their homes or refinance their way out of trouble.

The most dramatic fallout took place in the subprime market, which caters to people with blemished credit or other factors that make them a risk to lenders.

Those borrowers entered foreclosure at a rate of 2.43 percent, up from 2 percent the previous quarter. The percentages seem small, but they are far above norms, particularly in a healthy economy. The concern is that the mortgage industry’s troubles could damage the economy if they are not contained.

For more credit-worthy, prime borrowers, foreclosures rose slightly, to 0.25 percent, in the first quarter from 0.24 percent in the previous one.

New foreclosures for prime and subprime borrowers combined hit record highs. They rose to 0.58 percent on a seasonally adjusted basis, compared with 0.54 percent in the previous quarter and 0.41 percent a year earlier.

The high translates into about 254,591 mortgages, or one in 172 loans, the association said.

The problems weren’t uniformly spread around the country. Doug Duncan, chief economist for the mortgage bankers group, said the rate of new foreclosures would have dropped had it not been for big jumps in California, Florida, Nevada and Arizona. He said high rates in Ohio, Michigan and Indiana also drove up the overall percentage of loans in foreclosure.

Some who track the industry say the worst is yet to come.

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