Mr Mortgage's Guide to the TRUTH!

Credit Suisse - 12.7% of All Borrowers Will Be Foreclosed Upon

This little ditty below is one of the most aggressive foreclosure projections to date out of a large-named bank. Funny thing is, it goes hand-in-hand with my Subprime/ALT-A video in which I illustrate the overwhelming similarities between the two universes. YouTube Link... MR MORTGAGE - FUTURE ALT-A CRISIS EXPOSED . For the record, I think they are being conservative but '12.7% of all residential borrowers losing their homes' is quite a thought. -Best, Mr Mortgage

From Reuters: Foreclosures to affect 6.5 mln loans by 2012-report

Falling U.S. home prices and a lack of available credit may result in foreclosures on 6.5 million loans by the end of 2012. The foreclosures could put 12.7 percent of all residential borrowers out of their homes .

Credit Suisse expects home prices will fall by 10 percent in 2008 and 5 percent in 2009, before rebounding. The forecast includes the 1.2 million homes currently in foreclosure or already bank Real Estate Owned (REO). Credit Suisse sees 2008 as the peak year for foreclosures, even though they see the price bottom (25% off the peak) in 2009. The normal pattern is for the foreclosure activity to peak in the same year as housing prices bottom.

Of the 1.2 million current foreclosures, Credit Suisse estimates about half are due to subprime borrowers, and about half other borrowers (alt-A, prime). Although Credit Suisse expects a much higher percentage of subprime borrowers in foreclosure, the pool of other borrowers is much larger, and Credit Suisse expects close to 4 million other borrowers to lose their homes to foreclosure through 2012.

http://www.reuters.com/article/bondsNews/idUSN2233380820080422

Mortgage Applications Plunge As Rates Soar

Good Morning. When rates click over 5.75%, applications slow and over 6% on 30-year fixed product, the mortgage market seizes. In the good 'ol days, exotic programs would fill the void because many programs, such the Pay Option ARM, were impervious to rate increases...remember it is all about the monthly payment. Two things to consider here when reading the link below; the 6.04% average rate they quote is not reality because at 'no-points' it is closer to 6.25% on a $417k loan and 7.0% on an new Agency 'Con'-Jumbo; and the number of applications that actually close remains extremely low, hovering around 40% from research I have done at four national banks.

This ties in nicely with the report I posted a few days back that was highly ridiculed by some but now looks extremely accurate and foresighted called 'NEW FANNIE/FREDDIE 'CON' JUMBOS ALREADY A BUST' http://mrmortgage.typepad.com/blog/2008/04/new-fanniefredd.html - Best, Mr Mortgage

*(Reuters) NEW YORK - Mortgage applications plunged last week, largely reflecting a drop in demand for home refinancing loans as interest rates surged, an industry group said on Wednesday. http://www.reuters.com/article/ousiv/idUSNAT00395920080423?sp=true

CA HOME PRICES IN FREEFALL DUE TO LACK OF JUMBO FINANCING

The lack of jumbo loans has destroyed the CA real estate market. Without aggressive, affordable jumbo loans, prices will naturally gravitate towards the most available financing, which is Fannie/Freddie $417k loans. 90% of the most widely used loans in CA over the past several years have vanished in the past 6 months. The new Fannie/Freddie 'ConJumbos' carry a rate much too high to complete with the affordibility of the programs that were lost. Now that all the exotics and jumbos are gone, home prices will also have to gravitate towards borrower qualifications using real household income. This means that if the average household income in San Francisco Bay Area is $85k, that borrower can qualify for about a $350k loan. Currently, the average home price is closer to $550k meaning we could have alot further to drop. Now, that we are back to traditional lending, historical valuation measures must be considered such as 3-4x household income, rental cap rates ect. As prices drop, defaults natually rise across all borrower types due to the 'negative equity effect'. Banks then take more losses, tighten credit further and this never ending snowball cycle continues.   -Best, Mr Mortgage

San Francisco Home Sales Fall 41% Amid Tighter Credit (Update1) 2008-04-17 13:53 (New York) By Dan Levy

April 17 (Bloomberg) -- Home sales in the San Francisco BayArea dropped 41 percent to the lowest level for a March in more than two decades as stricter mortgage standards reduced the number of potential buyers and prices fell, DataQuick Information Systems Inc. reported.

The number of houses and condominiums sold in San Francisco, Santa Clara, Marin and six other counties fell to 4,898, the seventh consecutive month that sales reached a record low, La Jolla, California-based DataQuick reported today. The median price decreased 16.1 percent from a year earlier to $536,000.

Sales are declining as lenders require higher down payments and credit scores and buyers have difficulty obtaining mortgages above $417,000, known as jumbo loans. The Bay Area median price would have been closer to $597,000 last month if jumbo availability had ``remained stable,'' DataQuick said.

"It still appears that a lot of Bay Area activity is just on hold, waiting for the mortgage markets to open back up,'' Marshall Prentice, DataQuick's president, said in the statement.

Home purchases made with jumbo loans accounted for 29.8 percent of sales in March, down from 62.2 percent a year earlier, said DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, which began collecting the data in 1988.

Editor: Peter S. Green, Walid El-Gabry. To contact the reporter on this story:
Dan Levy in San Francisco at +1-415-617-7077 or dlevy13@bloomberg.net

2PM PST -BREAKING CA FORECLOSURE NEWS NOBODY REPORTING -ACCELERATING FAST

Below are the real March foreclosure numbers for CA just released minutes ago from ForeclosureRadar. Sit back, relax, have a large bottle of brown liquor nearby and read away. Remember when reading, that Notices-of-Default lead foreclosures by several months in some cases. Also remember, this housing and credit crisis will not end until home prices/sales/foreclosures bottom and stabilize. By the looks of the most recent data, that is a long way off.

**In CA for March, there were 27,541 FORECLOSURE FILINGS and 42,704 NOTICES OF DEFAULT for a total of 70,246 early/mid stage foreclosure filings. This is the killer that nobody reports...in CA in Feb, ALL HOMES (New & Existing) SOLD WERE ONLY 20,513. ALL NEW HOMES SALES for the ENTIRE 10-STATE WESTERN REGION in Feb were only 13k and ALL EXISTING HOME SALES for the ENTIRE 10-STATE WESTERN REGION were only 55k. One more thing...the MAJORITY of the Notice of Default surge is not from subprime loans. Not even close. I can't specifically tell you which program types are defaulting to the greatest degree, as that is part of a paid service rolling out soon, but I can say they are not subprime and they are not fixed...actually they likely are subprime but the ratings agencies just haven't got there yet!

This means that March CA foreclosure activity is...A) greater than all THE HOMES PURCHASED IN THE WESTERN REGION the month prior. B) nearly 350% GREATER than all the homes bought in CA alone! C) Not primarily a subprime problem. This is a disaster.

Also note that repossessed homes that are sold through a real estate agent count in the Existing Home Sales number, so the problem is alot worse than the public data show.

Foreclosure sales at auction declined 6.5% to 15,833 units likely due to the unavailability of financing and general fear.

Wow!! ONLY 2.3% of foreclosed homes sold at auction...the rest went back to the lender swelling inventories...how about tham apples Charles Bederman. This is despite an average discount of 21% with 39% of the homes offering a 30% or greater discount.

In summary, the worst in CA is absolutely still to come for housing. And everyone is too busy trying to figure out how to bail people out and focusing on subprime to realize that WE HAVE NO JUMBO LOAN PROGRAMS. The Fannie/Freddie 'conforming/Jumbo' programs stink, as they have very few programs available and nobody wants a 7% 30-yr fixed rate loan. Why, when they have an exotic currently and their payment is one-third of a 30-yr fixed. It is all about the monthly payment, remember. For purchases, a 7% 30-yr fixed with a large down payment does not buy the average household much home.

Given this, the worst is yet to come for the financial markets because until real estate quits crashing and goes through a long period of stabilization there can be no basing and subsequent recovery. Either that or bring back all the exotic loan programs and the problems end tomorrow. - Best, Mr Mortgage

This report compliments of data provided by ForeclosureRadar...nobody compares to their accuracy, timliness or depth. You can sign up for your free monthly report by going to the site link above.

FORECLOSURE RADAR MONTHLY CA FORECLOSURE REPORT

Download Mar_2008_CA_Foreclosure_Report.pdf 

Back-Up data for Mr Mortgage analysis in addition to the ForeclosureRadar report:

DataQuick Monthly Home Sales Report

Realtor.Org New Home Sales Data

Census Bureau New Home Sales Data

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Businesses looking for more detailed CA foreclosure information and analysis BY BANK on the mortgage products driving this crisis, the real conditions on the ground and what is likely to come next, please contact me at mrmortgagetruth@gmail.com .

Coming soon -

-Data on every foreclosure by bank (ground zero for the housing crisis)

-Daily updates on foreclosure sales (only source of same day housing sales data currently available)

-Exclusive auction discount data (an early look at which banks are dealing or need to deal)

-Auction pull-through data (what percentage is selling at auction from which banks)

-Which banks maybe delaying foreclosures and why

-Current and projected REO inventories

-Rates and velocity of change in NOD's, foreclosures and REO by bank and market graphically displayed (bank specific risk-management failures)

Foreclosures/Defaults Surge In March - "Foreclosures Have Become The Real Estate Market"

Numbers are just getting worse month over month. The 'Foreclosure Market' has quickly become the 'Real Estate Market'. The 'negative equity effect' is in full force, as people walk from their homes and chose to rent vs. paying 2 to 3x for a mortgage, home ownership and all the other expenses that come along with it. Today, the ForeclosureRadar CA foreclosure report comes out and I will have it posted as soon as it is released to the public. On top of it all, there are no 'affordable' mortgage programs to help people in higher-priced States such as CA, so you cannot refinance out of your problems. This is all going down a road that will lead to a national 'loan amount reduction' bailout, where the Fed prints money, mortgage balances are reduced across the board and overnight, everyone is right-side up in their homes again. Either that, or they bring back all the exotic/affordable loan programs. -Best, Mr Mortgage

U.S. Foreclosures Jump 57% as Homeowners Walk Away (Update2)  By Dan Levy

April 15 (Bloomberg) -- U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.

More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and Florida had the highest foreclosure rates. Filings rose 5 percent from February.

About $460 billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc. Auction notices rose 32 percent from a year ago, a sign that more defaulting homeowners are ``simply walking away and deeding their properties back to the foreclosing lender'' rather than letting the home be auctioned, RealtyTrac Chief Executive Officer James Saccacio said in the statement. CONTINUED - CLICK LINK BELOW

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahJfJhKyxAWI&refer=home

Wachovia Drops a Bomb...The 'Pay Option Implosion' Has Begun

First, they moved up their earnings date four days to today. Second, they miss horribly - analysts were expecting 40 cents and they announced NEGATIVE 14 cents. Third, they cut their dividend drastically. Fourth, they raised $7 Billion in combo of common and preferred shares. Terms of their offering...$3.5 bil in preferred shares at 7.5% coupon and 30% conversion premium PLUS 146 million common shares at $24. Given they are one of the largest Pay Option ARM holders in the world, this is likely only their FIRST capital raise despite what Goldman is trying to push this morning.

Wachovia, who bought World Savings/Golden West a couple years ago and inherited $120 BILLION in Pay Option ARMs in the process, is having trouble. The is undoubtedly due to their massive expose to the Pay Option ARM. As you all know, Wach adopted the Pay Option ARM as their primary portfolio mortgage since the acquisition and are still doing commercials to this date with people dancing around their house shaking their bodies and dancing because they can make a much lower mortgage payment when they want to and accept negative amortization (mortgage balance INCREASES). Absolutely irresponsible! Pay Option ARMs were in part responsible for the massive losses from all the players who were the largest players in the program including American Home Mortgage, Countrywide, IndyMac, Downey, First, Fed Bank United, Lehman and Bear. In addition, when they go bad they are total losses in many cases because most are in a severly negative equity position.

We have learned in the past few months, that negative equity is a leading cause of loan defualt, even more so than periodic ARM adjustments. This is why Pay Option ARMs are essentially worthless and Wachovia will be stuck with these in perpetuity awaiting their default or modifying loan balances lower one by one.   

Pay Option ARMs have just started to implode with the big bang coming from 2010 - 2012 unless housing magically appreciates some 5-9% per year going forward (compensate for neg-am) and somehow makes back most of the losses already taken before these loans implode. Remember, this loan programs was the fastest growing from 2005-2007 when prices were at their peak, meaning this group of loans should be some of the worst performing going forward. The ratings agencies just have not got there yet, as usual.

Pay Option factoids...80% of these loans were done in bubble states, 80% of the people pay the minimum monthly payment and accept the neg-am; most of those have an increase in mortgage balance of 5-9% per year, and in 2006-2007 80% were stated income. There are reports out saying at least 50% of all Pay Option ARM borrowers have a second mortgage as well.

This is a great chart of the ARM reset catastrophe  - take a look at the Pay Option Implosion coming soon. This could make the 'Subprime Implosion' look like a walk in the park because Pay Options cut across all socio-economic boundaries with these loans being most prevalent in higher-priced bubble regions. -Best, Mr Mortgage

http://bp2.blogger.com/_nSTO-vZpSgc/R_HlCECrufI/AAAAAAAACZE/E1WPLRuaWmY/s1600-h/Mortgage-Rate-Resets-1.png 

GE MISSES! Down HUGE Premarket...

Now, this is news...and forward looking news. GE doesn't miss. This is a joke right. They are the absolute proxy for the global economy. Think we maybe headed into a recession now? Humm? This is most definitely a wildcard that absolutely destroys the perma-bull's 'the bottom is in, buy all the dips with impunity' thesis. This just maybe the smoking gun that proves things are accelerating even after massive Fed intervention. This miss likely took GE by surprise too or Immelt would have warned...that is the story within the story. Bubblevision is freaking out trying to turn urine into lemonade of course. Hey, maybe CNBC (owned by GE) will have to fire Dennis Kneale in a cost-cutting measure. We will never get so lucky. In my opinion, not only does this miss show things are getting worse by the week, but it shows ANALysts are worthless. They don't have their crap together this quarter as usual. Their estimates for this quarter/year and especially 2009 are an absolute joke. Hey analysts...FALLING HOUSING PRICES DOES NEGATIVELY EFFECT THE CONSUMER.  Rising housing prices did the opposite for many years. See the correlation? You figure the rest out and how it applies to earnings. Oh ya, Dick Bove, please retire. Nobody else needs to lose money by you constantly calling a bottom that maybe a long way away. -Best, Mr Mortgage

GE Says Profit Fell, Citing Finance; Forecast Reduced (Update2)    

By Rachel Layne

April 11 (Bloomberg) -- General Electric Co. said first- quarter profit fell 12 percent, missing analyst estimates, because it couldn't complete asset sales and had higher-than- expected losses at its finance businesses due to disruptions in global capital markets. GE cut its full-year forecast.           

Profit from continuing operations dropped to $4.36 billion, or 44 cents a share, from $4.93 billion, or 48 cents, a year ago, Fairfield, Connecticut-based GE said today in a statement, trailing the average analyst estimate of 51 cents. GE shares declined in Germany.

http://www.bloomberg.com/apps/news?pid=20601087&sid=akzHhrEzO6hU&refer=home
    

Wilbur Ross May Back Out of HR Block Deal! This 'One' Will Hurt

The 'hero' is getting cold feet after undoubtedly getting screwed by the American Home $50 Bil in Pay Option ARM servicing. I knew buying the servicing on $50 Billion in Pay Option ARM from American Home hurt him in no time. Remember, when he bought AHM, the Pay Option ARMs were not defaulting to any great degree yet. Since then, they have surged. I actually sent him a letter last year with many reasons not to. How the hell was he thinking he could pay advances on $60 billion in HRB (Option One) subprime with a current 40% default rate and a 50% recovery maximum on top of AHM's issues?

HRB carries a lofty valuation and have come through the subprime crisis with their stock price unscathed. But if not for the $1.1 Bil valuation they place of Option One and $1 Billion Good Will carry, these guys would have a major negative book and NO CREDIT LEFT. They owe SEVERAL Billion in short-term debt that they won't be able to roll and just sold $600 mil in 5-year notes so they are likely out of firepower. Best of all, their income is totally predictable and could take a nice hit going into recession meaning they have no way of a large surprise like 'the new HRB Phone'.

This could be the end of HRB. Option One was in the top 5 of all subprime lenders for YEARS running. No other company that did as much subprime as they did through Option One has skated through the subprime crisis without nearly collapsing and I suspect HRB will end up being along the same story lines. Maybe when this deal falls apart they will be forced to tell us about their off-balance sheet subprime loan exposure they have kept so secretive. I have heard from a couple of reliable sources their trusts own some $25 - $30 bil in subprime STILL, which would match up to their production levels in the 2nd half of 2006 when the secondary market fell apart for subprime loans into the later half of 2007 when they stopped doing subprime. They could be carrying an entire years production.   - Best, Mr Mortgage

BREAKING...HRB - Wilbur Ross says his planned deal to buy HRB's mortgage servicing unit has been thrown into jeopardy by bankrupt American Home Mortgage Investment Corp. - DJ

 

FED/BIG BANK NEWS that PISSES ME OFF!

Borrowing to support and grow a business is one thing but borrowing to support or grow your stock price is another. - Best, Mr Mortgage

 

1) US Rep Raises Concerns About Discount Window Abuses Last update: 4/9 1:43:00 PM By Michael R. Crittenden Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Investment banks may be abusing the money they are borrowing from the Federal Reserve's discount window in order to issue dividends, a top House Democrat said Wednesday. Rep. Paul Kanjorski, D-Penn., the chairman of the House subcommittee with oversight over the capital markets, raised the concern during a hearing Wednesday. He said a hedge fund manager suggested in a recent meeting that large banks may be borrowing billions of dollars in funds made available by the central bank in order to benefit their shareholders. "I myself will be incensed if after going to the rescue of these institutions there are those types of abuses occurring," Kanjorski said. "Particularly I'll be incensed if the Federal Reserve hasn't marched up here with emergency sirens saying there's something happening that shouldn't happen." Federal Reserve Gov. Randall Kroszner said he was unaware of any type of abuses, and that any such actions wouldn't be tolerated. He stressed that the funds have only been made available to a "limited number of institutions with which we have had a long-standing relationship." Still, Kroszner suggested Congress might want to pass legislation creating standards for the use of money borrowed through the Federal Reserve's lending facility. "It is going to be an issue going forward that Congress will need to consider whether there will be additional regulatory authority needed if this facility were to continue," Kroszner said. -By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273;

 

2) Fed to lend additional $50 Bil in UST to Primary's for 28-days- Have to stay ahead of demand I suppose. Funny, things like this pop up more often when stocks are going down.
http://www.newyorkfed.org/markets/tslf/termseclending.cfm

I guess the Fed is trying to stay ahead of the curve in here...why is it when stocks get weak, the Fed perks up. What is their true mission anyway. To fight inflation or fight the natural gyrations of the stock market?  - Best, Mr Mortgage

CITI, Wells and Others Curtail Lending! They Are Broke Too! OUCH!

This is a serious problem...we have no Real Estate loans in CA already. Unless you can live with a $417k, 6%-6.5% 30-yr fixed rate with 5 to 20% there is nothing for you. The new 'Agency Jumbo' loans have harsh pricing adjusters so the rates are closer to 7%...much better than the current 8% from Banks I suppose. But still, I can promise you that unless 30-year fixed rates go below 5.5%, housing and mortgage activity will continue to flounder. Anything higher and the purchase money borrowers can't afford it and the refi money do not need it. Why get out of an exotic loan paying 1% to 5% for a 7% fixed rate?   -Mr Mortgage

Citigroup, Wells Fargo May Fuel Recession by Curtailing Lending

By Mark Pittman, Alan Katz and David Mildenberg
Enlarge Image/Details

 

April 8 (Bloomberg) -- Bank holding companies including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. have the thinnest safety cushion against losses in seven years. READ ON... http://www.bloomberg.com/apps/news?pid=20601109&sid=a8EGjsM4moS8&refer=home

Mr Mortgage Wells Fargo video from yesterday:
http://www.youtube.com/watch?v=kb9byJ2QWcg

7am - Monthly Pending Home Sales Data Aweful

This is the LOWEST NUMBER SINCE REALTORS STARTED KEEPING TRACK IN 1991! HAHAHAHA. What recovery? The stock market is really looking ahead this time because financials and home builders keep on rallying and home sales keep on tumbling...and it's picking up steam!

Contracts signed in Feb were down 1.9% from Jan and 21.4% below Feb 2007.  The West fell 9/8%, South fell 5,5%,  Midwest fell 3.7% and the East was up +3.5 East.

For us with a half of a brain, WITHOUT LOANS YOU CANNOT BUY HOMES. In CA, for example, we have lost 95% of the most widely used affordable/exotic loan programs. Nobody can afford a CA-priced home with a 7-8% 30-yr fixed jumbo. Unless they bring back all of the exotic loans, give everyone 100% raises or cut home prices in half, sales will continue to tumble. It is that simple. We now have historical loan programs back so we are going back to historical valuations of 3-4 times household income. CA is currently at 7-12 times depending on the area. We have a long way to go.  -Mr Mortgage

6:20am - WAMU Raises $7 Billion at $8.75 Per Share - TOLD YA!!

I told you this was ugly. This makes suspect the valuation of all financials. 100% DILUTION! $8.75 secondary offering of common. This is so ugly. Preferred shares too means death-spiral financing.

WAMU WAS ESSENTIALLY GOING BANKRUPT AND WERE BAILED OUT. You mean to tell me that the stock market has priced-in the possibility of the nations largest S&L going bankrupt? Are you kidding me. - Best, Mr Mortgage

ALERT! 3:30PM EST...WAMU CLOSES DOWN WHOLESALE

10pm PST - Update...management still in meetings. I think the street got this one wrong. They ran WM stock price today as if it was another LEH style BS bailout. I have a hunch this will be totally different. Perhaps $2.5 Bil in common, $2.5 Bil in preferred...potential death-spiral financing. And no 7.25%...may be much higher.

Nobody is going to take on $65 Bil in Pay Option, $60 Bil in Home Equity, $20 Bil in Subprime and $40 Bil in weak credit card debt on the cheap. This is a bailout deal and will make suspect all other financial insti's who need to raise money over the next few weeks. The street was using LEH as a proxy for the way all other deals would get done...no way you lemmings.

3:3-pm PST - YOU HEARD IT HERE FIRST! More to follow...WAMU closes wholesale lending effective immediately. This Thursday is the last day to submit/lock. It looks like to me, that this $5 billion was a bailout.

-Best,

Mr Mortgage

WAMU May Get $5 Billion! SO WHAT!

This is a pee-hole in a snow-bank compared to their massive exposure of toxic Pay Option ARMs, Subprime and 2nd mortgages. $5 billion may be a couple months worth of losses in the coming months. Funny how these firms think they can call the bottom. I remember Warburg paying $31 per share for MBIA. That was STUPID! Good luck with your WAMU investment. You will need it. - Best, Mr Mortgage

By MATTHEW KARNITSCHNIG, VALERIE BAUERLEIN and ROBIN SIDEL
April 7, 2008; Page A1

Private-equity firm TPG and other investors are close to a deal to invest $5 billion in Washington Mutual Inc., people familiar with the matter said Sunday.

The injection of new capital would allow the country's largest savings and loan to ease its pressing capital requirements, the people said, amid punishing losses from the national mortgage crisis. But it would substantially dilute current WaMu shareholders, who have already lost 74% of their investment over the past year. WaMu's market capitalization on Friday was just under $9 billion, after its shares dropped 11% that day.

http://online.wsj.com/article/SB120753199958893909.html?mod=MKTW

BANKS, OVERWHELMNED, NOT FORECLOSING

Either 1) they don't have the staff or 2) they don't want the write-downs and are waiting for the big bailout. - Best, Mr Mortgage

Lenders Swamped By Foreclosures Let Homeowners Stay (Update1)    

By Bob Ivry                                                      

 

April 4 (Bloomberg) -- Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.    

The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.           

Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody's Economy.com, a unit of New York-based Moody's Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.    

``We don't have a sense of the magnitude of what's really going on because the whole process is being delayed,'' Zandi said in an interview. ``Looking at the data, we see the problems, but they are probably measurably greater than we think.''

CONTINUED -

http://www.bloomberg.com/apps/news?pid=20601109&sid=aOluOO8Vy0gc&refer=home