Home loan defaults rose nearly 14% in the last quarter from the previous quarter, research group RealtyTrac said Friday in a sign of deepening housing woes. According to RealtyTrac, on a yearly basis, home loan defaults and foreclosure filings increased 121%  from the same period in 2007.  Home loan defaults have rose to their worst levels in decades as the housing crisis continues with soaring energy costs and dropping property values.  To make matters worse, unemployment and inflation continue on the rise.  Many homeowners continue report increased difficulties to refinance their adjustable rate mortgage loans into a lower fixed rate payment that works with their shrinking budgets. 

RealtyTrac said that foreclosure filings were reported on 739,714 US properties during the second quarter.  Real estate data company reported in their survey, that 1 out of every 171 US households had received a foreclosure filing and the distress and sentiment was nationally.  In addition, the report noted that 48 of the 50 states and 95 of the 100 major city regions had experienced year-over-year increases in foreclosure activity.  “Although much of the fallout from loan modifications and foreclosures comes from rampant activity in a few states, such as Nevada, California, Florida, Ohio, Arizona and Michigan, most areas of the country are seeing at least some increase in foreclosure activity,” said RealtyTrac chief executive James Saccacio said in a statement.  Nevada, California, Arizona and Florida, where home prices soared for many years before the collapse of the US housing market in 2006, led the country in foreclosures. Nevada has been hit the worse, with 1 in 43 households reporting a home loan default which is almost four times higher than the average foreclosure rate reported nationally.

With recently passed Mortgage Rescue Bill and affordable FHA home loans, many real estate experts believe that we have already hit the bottom and that a recovery has begun.  Only time will tell, but industry insiders maintain that it will be critical for the Federal Reserve to hold off as long as possible from raising key interest rates that have a significant impact on FHA mortgage rates and available home loan products from FHA, Fannie Mae and Freddie Mac.

In a recent article written by Paul Jackson, the topic of risk-based pricing expanded for FHA home loan products.  The FHA commissioner Brian Montgomery gave a speech that touched on mortgage lending for low and moderate income homes. It was suggested that the mortgage meltdown and current declining housing market could have been prevented had Congress acted on Bush administration suggestions made years ago.

In his remarks at the FDIC inspired forum, Montgomery said that Congress’ failure to modernize the FHA contributed to the subprime problem, implying that had Congress acted earlier, the mess might have been avoided.  “We were marginalized during the boom, unable to compete because of low FHA home loan limits and higher down-payment requirements,” he said. “Well, we know the outcome, a subprime mortgage crisis that has now evolved into a worldwide credit crisis.”

“Frankly, at FHA we saw the problem coming.”The strong stance taken by Montgomery surprised more than a few market participants, who said that anyone claiming the current mortgage mess might have been avoided, is wrong.  “Montgomery is usually pretty level-headed,” said one source, a senior bank executive that asked not to be named, “but this sort of grandstanding does little to help matters.”

The FHA Commissioner said that the Bush administration has pushed for FHA modernization since 2006, and that Congress has repeatedly stymied efforts to make the government insurance program “more competitive and responsive to market conditions.”