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Home loan delinquency rate shows increase
By Noelle Knox and Barbara Hansen, USA TODAY
More Americans fell behind on their mortgage payments at the end of last year as they struggled in the face of hurricane damage, rising interest rates, higher gas prices and holiday credit card bills, the Mortgage Bankers Association said Thursday.

The percentage of Americans who were delinquent on their home loans rose to 4.7% in the fourth quarter, the highest level since mid-2003. Late mortgage payments soared in the hurricane-stricken states of Louisiana and Mississippi. (Chart: Rates in all 50 states.)

And homes going into foreclosure reached alarming levels in a handful of Midwest states — Ohio, Indiana and Michigan — that were once the backbone of industrial America but have seen an exodus of manufacturing jobs.

About one in five mortgages in Louisiana and Mississippi was overdue. But "the results in those two states simply magnify the trend in the national data," said Doug Duncan, chief economist for the MBA.

in the last quarter and once so far this year. Duncan expects the Fed to raise them again in two weeks and maybe once more this year. That could mean nasty surprises for the 25% of borrowers with adjustable mortgages.

When someone loses a home through foreclosure, the consequences extend far beyond the homeowner.

"It's a domino effect," said Lorie Batdorf of Neighborhood Housing Services in Hamilton, Ohio, a non-profit group that helps low-income buyers. She notes that foreclosures often lead to abandoned homes, vandalism, increased police visits and a lower tax base. "The neighbors still there see a decrease in property values, so it affects everybody."

Ohio had the highest number of loans in foreclosure for the second year in a row. In addition to layoffs at auto and steel factories, residents have fallen victim to predatory lenders. About 16% of mortgages made in Ohio last year were predatory loans, and nearly half the foreclosures involved such loans, said Batdorf, who serves on a state foreclosure task force. A predatory loan typically has unfavorable terms and high fees, which are poorly disclosed or understood.

Kathy Grubb, who fell behind on her mortgage in October, calls the process "devastating."

"I don't eat, I don't sleep, I can't think, I can't talk to anybody," says Grubb, 44.

Because of her husband's poor credit, they became entangled in a loan they couldn't afford in New Miami, Ohio, in 1998. Grubb, who works at an auto parts store, is $5,700 delinquent and could lose her home on March 27.

The number of foreclosures is expected to rise this year. The rates of new foreclosures in Michigan, Indiana, Wisconsin and Georgia are at their highest since 1979.

"This is evidence of a structural change — an economic chain reaction," Duncan said.