The rising delinquency and foreclosure rates in South Carolina

January 3rd, 2008

Don Schunk, research economist at Coastal Carolina University in Horry County said that he is pretty worried about worsening housing markets and he suggested that there could be a recession. According to another forecast release by the USC economists, the reports suggested that the state economies of the nation and the state will grow at a slower rate in 2008 that what it was this year.

This above fear was turning into a reality when a report by the Mortgage Bankers Association suggested that they are more South Carolina homeowners who are entering foreclosures and they are falling behind on their mortgages. The report from the Washington D.C based group showed that the conditions in South Carolina were at a record low and it was wore than what the entire nation was going through. About 1.7 percent of South Carolina mortgages were in foreclosure on Sept. 30, up from 1.6 percent a year earlier. The U.S. foreclosure rate was also 1.7 percent, up from 1.1 percent a year ago.

It was already issued as a warning by the quarterly report which indicated that the weakening of the housing market in 2006 with the failure of the subprime mortgages. This has resulted in a glut of homes on the market meaning that the borrowers now had a tighter credit standard and lower price to deal with. This was what the risk of recession as mentioned by Don Schunk referred to.

The number of late payments had increase to about 6.5 percent who were more than 30 days late which was up from 5.9 percent a year ago. The U.S. delinquency rate was 5.8 percent Sept. 30, up from 4.8 percent a year ago.

Doug Duncan, the Mortgage Bankers’ chief economist, said, “For housing, it’s a severe recession, but it hasn’t brought the whole economy into recession,” which indicated that U.S. home values will fall for the year in 2007, and foreclosures and late payments will rise through late 2008.

One of the key elements that helped recovery from a similar recession of 2001 was a stronger housing market.

According to Schunk, the rising delinquency and foreclosure rates were a reflection of the loose lending practices of the past few years where low teaser rates were offered this was adjusted sharply up after a couple years which in turn would lend the full price of the house and requiring little or no proof of income.

“We know there were a lot of loans made that shouldn’t have been made,” Schunk said. “A lot of the funding to make those types of loans is gone. That’s a good thing.”