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The delinquency rate does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process was 1.28 percent of all loans outstanding at the end of the first quarter, an increase of nine basis points from the fourth quarter of 2006 and 30 basis points from one year ago.

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

"The rate of delinquencies is being driven by what is taking place in seven states. The percentage of loans in foreclosure would be well below the average of the last ten years were it not for Ohio, Michigan and Indiana, and the rate of foreclosures started nationwide would have fallen were it not for the big jumps in California, Florida, Nevada and Arizona. Those states have special circumstances that do not reflect what is happening in the rest of the country," said Doug Duncan, MBA's Chief Economist and Senior Vice President of Research and Business Development.

Regarding the situation in California, Florida, Nevada and Arizona, Duncan said:

• "While foreclosure starts increased slightly from last quarter, thus setting another record, most of the increase was due to only four states, California, Florida , Nevada, and Arizona. Without these four states, foreclosure starts would have declined. 24 states saw a decline in foreclosure starts, while the rest of the states saw negligible increases, with the largest increases coming in Nevada (19 basis points), Florida (13 basis points), California (12 basis points), Maine (8 basis points), and Arizona (7 basis points)."

• "Information provided to the MBA from a variety of sources indicates that the foreclosures in Florida, Nevada, California, and Arizona are heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes. In addition, speculators in Florida are also facing much higher insurance bills."

• "Much attention has been paid to the performance of the subprime ARM market. The rate of foreclosures started on subprime ARMs jumped from 2.7 percent to 3.23 percent. However, the states mainly responsible for that increase were California, Florida, Nevada and Arizona. Twenty-six states had decreases in the foreclosure rates on subprime ARMs, and the national foreclosure rate on subprime ARMs would have slightly declined were it not for the increases in those four states."

Regarding the situation in Ohio, Michigan and Indiana, Duncan said:

• "While Ohio, Indiana and Michigan account for 8.7 percent of the mortgage loans in the country, those three states account for 19.9 percent of the nation's loans in foreclosure and 15.0% of all of the foreclosures started in the country during the first quarter. Without these three states, the percent of loans in foreclosure in the US would be below the average over the last 10 years, 1.12 percent versus an average of 1.19 percent."

• "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."

• "The problems in these three states extend across all loan types. For example the percent of subprime ARM loans seriously delinquent in Ohio, those loans 90 days or more past due or in foreclosure, is 19.9 percent, twice the national average of 10.1 percent. However, for prime fixed-rate loans the Ohio seriously delinquent rate of 1.9 percent is almost three times the national average."

• All three states have suffered large declines in manufacturing employment. While we have seen some pickup in service sector employment, that employment is not often in the areas where job losses occurred and the wages are often lower. For example, while we have seen increases in employment in places like Cincinnati, Columbus, Ann Arbor, and Indianapolis, we have seen job losses in Detroit, Flint, Cleveland, Dayton and Muncie.

Change from last quarter (fourth quarter of 2006)

The delinquency rate increased one basis point for prime loans (from 2.57 percent to 2.58 percent) and 44 basis points for subprime loans (from 13.33 percent to 13.77 percent). The delinquency rate decreased 131 basis points for FHA loans (from 13.46 percent to 12.15 percent) and 33 basis points for VA loans (from 6.82 percent to 6.49 percent).

Relative to the previous quarter, delinquency rates increased 30 basis points for prime ARM loans (from 3.39 percent to 3.69 percent) and increased 131 basis points for subprime ARMs (from 14.44 percent to 15.75 percent). The delinquency rate for prime fixed loans decreased eight basis points (from 2.27 to 2.19 percent), while the rate increased 16 basis points for subprime fixed loans (from 10.09 percent to 10.25 percent).

The foreclosure inventory rate increased for most loan types. The foreclosure inventory rate increased four basis points for prime loans (from 0.5 percent to 0.54 percent), 57 basis points for subprime loans (from 4.53 percent to 5.1 percent), and four basis points for VA loans (from 1.01 to 1.05). The foreclosure inventory rate remained unchanged for FHA loans (2.19 percent).

The new foreclosure rate increased one basis point for prime loans (from 0.24 percent to 0.25 percent), 43 basis points for subprime loans (from 2 percent to 2.43 percent), and seven basis points for VA loans (from 0.34 percent to 0.41 percent). The new foreclosure rate decreased three basis points for FHA loans (from 0.93 percent to 0.9 percent).

In the first quarter of 2007, the percent of loans that were seriously delinquent, which is defined as the NSA percentage of loans that are 90 days or more delinquent or in the process of foreclosure, was 2.23 percent, two basis points higher than for the fourth quarter of 2006. This measure is designed to account for inter-company differences on when a loan enters the foreclosure process.

Change from last year (first quarter of 2006)

Compared with the first quarter of 2006, the SA delinquency rate increased for prime and subprime loans and decreased for FHA and VA loans. The delinquency rate increased 33 basis points for prime loans and 227 basis points for subprime loans, while decreasing eight basis points for FHA loans and 44 basis points for VA loans.

The foreclosure inventory rate increased 14 basis points for prime loans, 160 basis points for subprime loans, and one basis point for FHA loans. The rate decreased nine basis points for VA loans.

The SA rate of new foreclosures increased nine basis point for prime loans, 81 basis points for subprime loans, seven basis points for FHA loans, and two basis points for VA loans.

Last week, I was sent out by a lender to contact a homeowner who was behind on their payments.  At the door, I met an elderly Hispanic woman who seemed to be packing for a move.  I asked her if the owner was there so I could speak to him about possibly modifying the loan of seeking other type of lender provided assistance. 

It turn out that the owner I was looking for was her 21 year old son who had died about a year ago.  Back when the home was purchased, some agent and lender talked her into letting her son go on title and the loan alone, because he had untarnished credit and could qualify for better "stated income" financing.  They assured her that this "was the best way to go" and that they could add her and her husband back to title right after closing.  Well the parents never got added onto the title as promised, the commission checks were cashed and their son had an untimely death.  The result was that in addition to losing their son, they invested every dime into the house, had no right of ownership, no money for a laywer and the debt on the home was more that it's current market value.  Another agent came along and told them to stop making the payments because they "don't even own" the property and were wasting their money.  He then advised them to list the home with him and that he could sell it as a "short sale".  5 months later, $18,000 delinquent, no sale ever occured, the agent quit and they were just a few days from the trustee sale at the courthouse steps.  All they could do was pack their stuff and find somewhere to go.  I wished there was something I could do, but it was too late.  As she cried at the front door, I wished her God's blessing and said goodbye.

A second study forecasting millions of foreclosures sweeping the nation in the next few years, says it won't matter what the Feds do to fix the problem.

"Foreclosures Will Affect 2 Million Homeowners," by upstart housing market researcher HomePredictor.com says subprime mortgages are the culprit.

Among the independent researcher's findings:

• More than 2 million homeowners will face foreclosure in next two and a half years, due largely to loans written that shouldn't have been.

• Most, 76 percent of recent foreclosures resulted from high-interest rate subprime loans made to borrowers who could not otherwise qualify for a loan.

• Another 15 percent of the failed loans were made with conventional mortgages, but many contained risky low- or no-down payment terms.

• The remaining 9 percent of foreclosed loans studied included no- and low-documentation loans that get approved with little if any verification of income.

• More than 50 percent of all home mortgages made in 2006 were written with 5 percent or less down.

"The figure is particularly significant since mortgages like this were nearly impossible to obtain except by those with excellent credit histories and strong incomes until two years ago," said Mike Colpitts, editor of HomePredictor.com.

Colpitts says the study is based on a survey of 100 real estate market's public records and interviews conducted by researchers.

Late last year, the five-year-old Center for Responsible Lending's report on the matter, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners" used a proprietary loan-level dataset of more than six million securitized subprime loans and determined 2.2 million homeowners have either already lost the farm or will by 2008, due to subprime loans.

The center has long called for stiffer federal rules to govern the risky loans.

Rebutting the Losing Ground study, "U.S. Mortgage Borrowing: Providing Americans with Opportunity, or Imposing Excessive Risk?" a study by the four-year oldCenter for Statistical Research (CSR) says stiffer rules could push from 580,000 to 1.1 million borrowers out of the market and leave as much as $188 billion in mortgage money in the bank.

The CSR study used mortgage origination data from "several major financial institutions" and was funded by the American Financial Services Association (AFSA), a group of industrial banks, auto finance institutions, mortgage lenders, finance companies, credit card issuers and others providing credit to consumers and small businesses.

"There is some evidence that if the Fed doesn't drop rates by the end of the year, we'll be in a crisis," Colpitts said.

The Fed is busy with regulatory matters.

• The Federal Reserve Board has set June 14 for fifth public hearing on the Home Ownership and Equity Protection Act (HOEPA) frequently called upon to curb abusive lending practices.

• The hearings come after months of related testimony before Congress from industry and government officials, as well as consumer advocates.

• Also making the rounds, is the "Proposed Statement on Subprime Mortgage Lending" by the same group of federal monetary regulators that rewrote the rules on nontraditional home loans and equity loans.

• Those rules, "Interagency Guidance on Nontraditional Mortgage Products" and "Credit Risk Management Guidance For Home Equity Lending" were years in the making and some lenders not federally regulated slipped under the radar.

Less regulated state level lenders are, in part, why there's more regulatory action to attempt to manage the mortgage morass.

Colpitts says it won't matter if stiffer rules are written or if no rules are written.

"The consensus among economists is that the Feds just haven't acted fast enough to do anything. If they do anything, it will be too little too late," he says, comparing the current home loan landscape with the savings and loan scandal of the late 1980s and early 1990s.

But comparing the bail out then with the fury of foreclosures now is a lot like comparing prime mortgages with subprime mortgages.

There are a few similarities between the two events, but they include fraud, foreclosures and an economic drain.

Today, by and large, the soaring rate of foreclosures is more directly associated with poorly underwritten loans.

According to "An Examination of the Banking Crises of the 1980s and Early 1990s" by the Federal Deposit Insurance Corporation, which was spawned of another era of bank failures, during the bailout, layers upon layers of bad investing and poor banking habits were exacerbated by true real estate depressions in the Southwest, California, Florida and the Northeast.

One of the first responses to the problems then actually came with deregulation, not more regulations, as are on the drawing board now.

And, with the current administration and U.S. Congress preoccupied with a national election, immigration and a war potentially costing the economy more than $2 trillion, failing lenders will be hard fought to find anotherhalf trillion dollar bailout cache -- the estimated cost of the bailout