New Foreclosures Surge in First Quarter

The number of homeowners entering the foreclosure process spiked to a record level in the first quarter, according to a survey by the Mortgage Bankers Association.

The rate of loans entering the foreclosure process was 0.58% on a seasonally adjusted basis, four basis points higher than the previous quarter and up 17 basis points from one year ago.

Some of the biggest increases in new foreclosures were seen in California, Florida, Nevada and Arizona. The MBA says speculators who took out adjustable-rate mortgages in these four states are walking away from their properties now that home prices have fallen and the rates on their loans have reset.

In addition, speculators in Florida are facing much higher insurance rates.

Ohio, Michigan and Indiana also saw big increases in new foreclosures. The MBA notes in a press release that all three states have suffered large declines in manufacturing employment.

"While Ohio, Indiana and Michigan account for 8.7% of the mortgage loans in the country, those three states account for 19.9% of the nation's loans in foreclosure and 15.0% of all of the foreclosures started in the country during the first quarter," the association says.

It says the level of foreclosures and foreclosure starts for those three states exceed what occurred in Texas during the oil bust of the mid-1980s, and Ohio is the highest ever seen in the MBA survey for a large state.