''The numbers confirm that Florida is ground zero for the foreclosure crisis,'' said Miami-based attorney Kendall Coffey, who authored a book about the state's foreclosure laws.

* * *

Coffey, former U.S. attorney for South Florida, was cautiously optimistic about the rescue plan's ability to curb rising delinquencies.

''If the financial community, along with consumer advocates and local government do their job, there can be a very substantial benefit in Florida from the Obama proposals, but there are going to be major challenges in implementation and there will be widespread confusion about the options,'' Coffey said.

1 in 5 home loans in Florida delinquent

BY MONICA HATCHER

March 6, 2009 | Miami Herald

Florida's mortgage crisis worsened significantly in the last three months of 2008, with a stunning one in five home loans one month or more past due, the highest delinquency rate among the 50 states, an industry group reported Thursday.

Of those, 8.95 percent were in foreclosure -- representing 320,315 homes. Nationally, 12 percent of loans were past due, with 3.3 percent of those in foreclosure, representing 1.9 million properties.

The closely watched Mortgage Bankers Association survey, which tracks 45.4 million mortgages nationwide and 3.6 million in Florida, underscores the depth of the housing crisis underlying the country's economic woes and comes a day after the Obama administration released guidelines for a $75 billion homeowner rescue plan.

The Making Home Affordable program seeks to help up to nine million homeowners avoid foreclosure by modifying their mortgage terms or refinancing them into new loans with lower interest rates. Critics have said the program does not go far enough because it does not address the problems of borrowers who owe much more than their homes are worth, which is a key predictor of future foreclosures.

Nationally, the 12 percent mortgage delinquency rate was up from 10 percent in the third quarter, a sign that previous efforts to restructure mortgages have failed to provide significant relief. Florida's rate during that period rose even more precipitously, to 20 percent from about 16 percent in the third quarter.

Even Florida's most credit-worthy borrowers were among those showing increased signs of stress, with nearly 14 percent falling one or more payments behind, up from 11 percent in the third quarter of 2008.

SUBPRIME LOANS

The worst problems, however, continued to plague Florida's subprime borrowers in adjustable-rate loans, where 60 percent of mortgage holders were delinquent or in foreclosure, up from about 53 percent the previous three months. Nationally, 48 percent of subprime borrowers were delinquent or in default, up from about 43 percent the previous quarter.

Subprime loans, which are no longer available, were given to borrowers who had limited or spotty credit histories and are blamed for sparking events that led to the global financial meltdown and subsequent U.S. recession. They often came with low teaser rate payments that spiked after two or more years.

''We knew Florida had a particular problem with these loans, but only 40 percent are current -- that's six out of 10 that are delinquent. Across the board, Florida has issues,'' MBA chief economist Jay Brinkmann said.
Among the state's problems: rising unemployment -- the Florida economy shed about 250,000 jobs in 2008, plummeting home values, and a market swamped with adjustable-rate loans, mortgage fraud, and investor-owned properties.

''The numbers confirm that Florida is ground zero for the foreclosure crisis,'' said Miami-based attorney Kendall Coffey, who authored a book about the state's foreclosure laws.

Andrea Heuson, a professor of finance at the University of Miami who researches the real estate market, said that falling property values were still likely the largest contributing factor to rising defaults, despite weakening economic fundamentals.

LIMITED IMPACT

''The equity theory says that even if you are capable of paying off your mortgage, you might let the loan go into foreclosure if the outstanding balance on the loan is more than what you might think the house is worth,'' Heuson said.

The being the case, she said, the Making Home Affordable plan would have a limited impact because it does not address the question of principal reductions.

''Until prices get to the point where people believe the home values are going to stabilize, then we will continue to see foreclosures,'' Heuson said. Florida's investor-owners also were left out of the administration's program, likely leading to more foreclosures because such loans are a large part of the market and a sizable share of the state's problems, Brinkmann said.

Coffey, former U.S. attorney for South Florida, was cautiously optimistic about the rescue plan's ability to curb rising delinquencies.

''If the financial community, along with consumer advocates and local government do their job, there can be a very substantial benefit in Florida from the Obama proposals, but there are going to be major challenges in implementation and there will be widespread confusion about the options,'' Coffey said.

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