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RISMEDIA, March 9, 2009-(MCT)-The American Dream of homeownership continues to unravel. On Thursday, the Mortgage Bankers Association reported that 48% of the nation’s homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure.

And perhaps more alarming, a record 5.4 million American homeowners with a mortgage of any kind-nearly 12%-were at least one month late or in foreclosure at the end of last year.

The nation’s housing downturn was initially fueled by the loose lending standards that were practiced in California, Florida and Nevada. But now mortgages defaults are ramping up in places like Louisiana, New York, Georgia and Texas, where economic conditions are flagging and thousands are losing their jobs.

“The 48% figure doesn’t surprise me because that’s 48% of the people who got into dumb loans who are in trouble,” said Tom Adams, owner of Century 21 Adams & Barnes in Monrovia and Glendora. “But that second number is more alarming because it’s reaching across into areas of the nation where people didn’t think this would happen.”

As the recession grows deeper, more and more homeowners will be having difficulties, Adams said.

Foreclosures and short sales currently account for 70% of his company’s home transactions, he said.

“It’s what’s driving the bus,” Adams said. “Six months ago it was considerably less … 30 to 35%.”

Prime and subprime fixed-rate loans saw sharp increases in the fourth quarter, a sign that the problem is now the economy.

“We’re seeing increases in fixed-rate categories and that’s where the problems are coming from,” said Jay Brinkmann, the group’s chief economist. “The foreclosure picture is more clearly driven by the jobs market.”

That trend highlights one of the biggest challenges confronting the Obama administration’s mortgage relief plan launched this week. While the $75 billion plan could help change the loan terms or refinance up to 9 million homeowners, unemployed borrowers will have a hard time qualifying.

A component of Obama’s mortgage relief plan would allow bankruptcy judges to rewrite the terms of mortgage loans, thereby giving struggling homeowners a shot at staying put.

That provision was headed for House approval on Thursday.

“I think the bankruptcy part will be a much different spin,” Adams said. “It’s been softened up considerably to get Congress to approve it. But it will raise the cost of all future loans. Lenders will build the cost of this change into every loan they write down the road.”

Adams also noted that the mortgage relief plan won’t help homeowners who owe more than 105% of the value of their home.

“If someone put 20% down two years ago and their property has gone down 25% in value … they have no equity left,” he said. “So in a case like that you just have to let nature take its course.”

The Associated Press contributed to this report.

Copyright © 2009, San Gabriel Valley Tribune, West Covina, Calif.
Distributed by McClatchy-Tribune Information Services.