More Florida Mortgage Providers Face Defaults

Property investors who fell prey to the real estate bubble may account for up to one-quarter of defaults on prime-quality home loans in Florida.

As recently as 2005, owners who did not occupy their properties accounted for one-third of all “prime rate” mortgages originated in Florida.

“Defaults are on the rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home but is often the case of an investor gambling on a continued increase in home values and losing that gamble,” said Doug Duncan, the Mortgage Bankers Association’s chief economist and senior vice president.

“California, Nevada, Arizona and Florida were among the states with the fastest home price appreciation over the last five years. This rapid price appreciation attracted both speculators and home builders, a volatile combination. When over-supply became apparent and prices began to fall, many of these investors simply walked away from their mortgages.”

The association considered a Florida home loan in default if it was 90 days past due or in foreclosure.

Subprime mortgages, which have gained much notoriety in recent weeks, were connected to a smaller portion of properties likely owned by investors - and likewise accounted for a smaller portion of Florida home loans in default, the association found. In Florida, investors and landlords in 2005 accounted for up to 15 percent of all subprime mortgage originations.

Two years later, they are about 14 percent of subprime defaults.

Investors’ problems are adding to an already heavy level of delinquencies and foreclosures. In Brevard County, foreclosure filings are on pace to double the previous record high of the past 30 years.

Even when accounting for population growth, 2007 is still likely to see more local foreclosures than any other year since the early 1970s.

Through July, 2,394 Florida mortgage foreclosure actions were filed in Brevard County. If filings continue at the same pace, more than 4,100 foreclosures will be filed in Brevard by the end of the year.

Foreclosure filings here have topped 2,000 only once in the past 30 years. That was in 2002 when 2,019 foreclosure proceedings were started.

• If this year’s pace holds, it will mean there will be one Brevard County mortgage foreclosure for every 135 residents.
• The second-worst year in the past three decades was 1991, when there was one foreclosure filing for every 241 Brevard County citizens.

Despite the bleak real estate outlook, Florida’s new home market is stabilizing as a result of demand for homes and lack of overbuilding of them, according to a University of Florida study released Tuesday.

SOURCE: Florida Today