Speculators walking away from adjustable-rate mortgages in the West and Florida helped push the rate of foreclosure starts to a record high in the first quarter, the Mortgage Bankers Association said Thursday.

The rate of loans entering the foreclosure process in the first quarter of 2007 was .58 percent, up four basis points from the fourth quarter of 2006 and 17 basis points from a year ago.

In presenting the results of its latest National Delinquency Survey, the industry group said the rate of foreclosure starts nationwide would have fallen if not for increases in four states — Florida, Nevada, California and Arizona.

MBA Chief Economist Doug Duncan said foreclosures in those states “are heavily influenced by speculators” with adjustable-rate loans who are “walking away from properties” because they face interest-rate resets. He said speculators in Florida are also facing much higher insurance bills.

The states with the largest increases in foreclosure starts were Nevada (up 19 basis points), Florida (up 13 basis points), California (up 12 basis points), Maine (up 8 basis points) and Arizona (up 7 basis points). The rate of foreclosure starts actually fell in 24 states, but the problems in Florida and the West pushed the national rate up, Duncan said.

The percentage of loans in the foreclosure process at the end of the quarter was 1.28 percent of all loans outstanding, an increase of nine basis points from the previous quarter and 30 basis points from one year ago.

Duncan sliced the numbers another way, noting that if Ohio, Michigan and Indiana are removed from the equation, the percentage of loans in foreclosure would be below the average of the last 10 years.

“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 percent of all of the foreclosures started in the country during the first quarter,” Duncan said. “Without these three states, the percent of loans in foreclosure in the U.S. would be below the average over the last 10 years, 1.12 percent versus an average of 1.19 percent.”

Many economists say the rise in foreclosures in “Rustbelt” states heavily dependent on manufacturing is driven in part by job losses, while problems now emerging in other markets with less unemployment are tied to slowdowns or reversals in home-price appreciation. When price appreciation slows, homeowners with adjustable-rate mortgages may have difficulty refinancing their loans before their interest rates reset and their monthly payments increase.

The Mortgage Bankers Association has opposed some proposals by lawmakers to restrict the use of ARM loans and other mortgages perceived as risky, saying market forces have already forced lenders to tighten underwriting standards.

In releasing the latest numbers, the MBA emphasized that the delinquency rate fell 11 basis points from the previous quarter to 4.84 percent. But that’s still 43 basis points higher than the same time last year, and the decrease appeared to be driven by improving performance of FHA-backed loans, which saw a 131-basis-point decrease in the delinquency rate to 12.15 percent.

The delinquency rate on subprime ARM loans rose dramatically, by 131 basis points to 15.75 percent. That compares to a 30-basis-point increase on the delinquency rate for prime ARM loans, to 3.69 percent.

The delinquency rate for prime loans as a whole nationwide increased one basis point, to 2.58 percent, while the delinquency rate for all subprime loans grew 44 basis points to 13.77 percent

Duncan noted that while foreclosure starts on subprime ARMs climbed more than 50 basis points, from 2.7 percent to 3.23 percent, California, Florida, Nevada and Arizona were again driving the increase. Duncan said 26 states saw a decrease in the foreclosure rate on subprime ARMs, and the national rate would have declined slightly if not for the increases in those four states.

The MBA noted that problems in Ohio, Indiana and Michigan “extend across all loan types.” The seriously delinquent rate for prime, fixed-rate loans in Ohio — 1.9 percent — is almost three times the national average, the group said.

The percentage of subprime ARM loans in Ohio that are seriously delinquent is 10 times higher — 19.9 percent. But Duncan noted that’s nearly twice the national average of 10.1 percent.

Ohio, Indiana and Michigan have all seen “large declines in manufacturing employment,” the MBA noted, and the level of foreclosures and foreclosure starts in those three states “exceed what occurred in Texas during the oil bust of the mid-1980s.” The foreclosure numbers for Ohio are the highest ever seen in the MBA survey for a large state, the group said.

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