MBA: Delinquency and foreclosure rates surge to new highs in Q1 2008

The Mortgage Bankers Association just released its data on mortgage delinquencies and foreclosures for the first quarter of 2008. Here's what the numbers showed:

* The overall mortgage delinquency rate jumped to 6.35% from 5.82% in Q4 2007 and 4.84% a year earlier. This is the worst seasonally adjusted late payment rate since 1979.

* The subprime DQ rate jumped again -- to 18.79% from 17.31% in Q4 2007 and 13.77% a year earlier. But it's NOT just subprime loans that are souring. The prime delinquency rate rose to 3.71% from 3.24% in Q4 2007 and 2.58% a year earlier.

* The worst deterioration was evident in adjustable rate loans. Prime ARM DQ rates are all the way up to 6.78%, while subprime ARM DQs hit 22.07%. Meanwhile, the DQ rate on FHA loans improved -- to 12.72% from 13.05% a quarter earlier.

* The foreclosure figures were plug ugly. The percentage of mortgages entering the foreclosure process climbed to 0.99% from 0.83% in Q4 2007 from 0.58% a year earlier. The percentage of mortgages in any stage of foreclosure jumped to 2.47% from 2.04% in Q4 2007 and 1.28% a year earlier.

These are the worst readings on record. And the awful performance of subprime ARMs jumps right off the page at you. A whopping 17.09% of these loans were in some stage of foreclosure, up from 13.43% in Q4 2007 and 6.46% a year earlier.

The dismal mortgage performance figures released today are hardly unexpected. But they are shocking nonetheless. Delinquency and foreclosure rates were up across the board, hitting levels we haven't seen in almost three decades.

The boomtime expansion of reckless mortgage lending continues to take a heavy toll on subprime borrowers. Foreclosure rates in that subsector of the market have more than tripled since 2005. But this isn't just a "subprime problem." Falling home prices, the cooling economy, and the strain on household budgets from things like rising food and fuel prices are driving delinquencies higher in the prime market as well.

What about the future? Until home prices stabilize, we're going to be dealing with elevated foreclosure rates. Government assistance programs and loan modifications can help keep some folks in their homes. But when you're upside down on your loan, and something bad happens (job loss, divorce, you name it), your options are limited. And let's be frank: Too many people bought too much house with too many easy money mortgages in recent years. For many of these people, foreclosure will prove unavoidable.