Source:  Reuters

NEW YORK - About one in eight U.S. households, a record share, ended 2008 behind on their mortgage payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices, the Mortgage Bankers Association said on Thursday.

With unemployment at a 16-1/2-year high and expected to continue rising until mid- to late 2010, more borrowers will pay late or fall into foreclosure this year, said the group's chief economist.

"While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession," said Jay Brinkmann.

Duress is no longer isolated to borrowers with lower credit quality. As joblessness grew, so did late payments on prime fixed-rate loans that represent two-thirds of mortgages.

U.S. President Barack Obama's $275 billion housing stimulus program will standardize modifications for distressed loans and pave the way for more refinancing.

That should smooth differences caused by various moratoria by states and companies that temporarily curbed the surge in foreclosures in the fourth quarter, Brinkmann said.

"But keep in mind that there are three drivers to the housing problem, and this program of course addresses mostly the first one," he added, referring to loan structure, underwriting quality and fraud.

The two other problems -- an oversupply caused by overbuilding and foreclosures, and unemployment -- still loom large.

Having one in eight households late paying or in foreclosure is "unacceptable in a country like ours," said Nicholas Bratsofolis, senior managing director of structured refinance at mortgage bank LendAmerica in Melville, New York.

"Instead of wringing our hands, I think we should start utilizing the tools that the government has given to us to remedy the ills that are facing many of these homeowners," he said.

A record 11.18 percent of loans on one-to-four unit residences were at least one payment past due or in the foreclosure process in 2008.

The delinquency rate jumped 2.06 percentage points from a year ago to a record 7.88 percent. The share of loans in the foreclosure process leaped 1.26 percentage points in the year to a record 3.30 percent.

MBA started tracking the data in 1972.

Housing has yanked down the U.S. economy after being a key driver of it earlier this decade. In a vicious cycle, a weakening economy is now further siphoning demand for homes.

"In a recession like this, housing is never just about housing," said Jed Kolko, associate research director at the Public Policy Institute of California, in San Francisco. "Unemployment leads to foreclosures, foreclosures contribute to lower tax revenues, less consumer spending -- it's all related."  Continued...