While it is true that many more homeowners are going into foreclosure now than in recent years, many more homeowners were also given the opportunity to buy that they would not have had. According to the US Census Bureau, home ownership hit an all-time high of 69.2 percent of households in the 4th quarter of 2004 and it remains high at 68.9 for the 4th quarter of 2006. Unfortunately, not all who were given this opportunity were well qualified to buy and were not properly screened within the mortgage industry.  

With all the mixed messages in the media, how does the sub-prime mortgage situation affecting the average homeowner in Hawaii? First, let's look first at the national situation. Overall, the problem seems to led by defaults by sub-prime borrowers, who probably should not have been given loans or who were ignorant as to the implications of ARMs, and also by investors in certain underperforming areas who may have also taken out ARMs.

According to the Honolulu Advertiser, citing Mortgage Banker Association statistics, nationwide, 0.65 of 1 percent of loans entered foreclosure last quarter. Many of these loans were taken out by sub-prime borrowers. In the last quarter there were only 2.73% of prime loans in delinquency (not yet foreclosure), but there are 14.82% of sub-prime loans in delinquency.

Many delinquent and foreclosing loans were also taken out by speculators in the booming mainland areas that have now seen a market downturn. The nationwide problem seems to be driven largely by four particular states. 

As to investors, the MBA produced the following statistics:  

                              % of non-owner occupied property defaults
State                                      Prime                     Subprime
Nevada                            32                        24
Florida                             25                        14
Arizona                            26                        18
California                         21                        15

These states are all among the states facing the fastest increases in delinquent loans in the country.

However, in the rest of the US, non-owner occupied homes accounted for only 13 percent of prime defaults and 11 percent of subprime defaults. According to the MBA, had it not been for these 4 states, nationwide foreclosure start rates would have actually seen an overall decrease last quarter.

"'Defaults are on the rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home but is often the case of an investor gambling on a continued increase in home values and losing that gamble,' said Doug Duncan, MBA Chief Economist and Senior Vice President of Research and Business Development." 

Why are Nevada, Florida, Arizona and California so important to nationwide statistics? Mainly because California alone has 17% of and combined, these four states have over 1/3 of the nation's sub-prime adjustable-rate mortgages, which are favored by many homeowners and investors who expect to be in a property only a short period prior to selling. Experts state that the situation in these states could get even worse due to declining home prices, buyers who put little or no money down and are now upside down in their loans and unable to refinance, and the high supply of new homes in these areas. Problem states also include Ohio, Michigan and Indiana---states hit hard by job losses, and neighboring states of Illinois, Kentucky and Pennsylvania.

And for Hawaii? The MBA delinquency statistics for second quarter 2007 for the State of Hawaii are available but to my knowledge have not yet been published by the media. Hopefully, they will soon be released by the Mortgage Banker's Association of Hawaii.

Mortgage foreclosure statistics cited by the Honolulu Advertiser for the State of Hawaii come from a recent report by RealtyTrac, an Irvine, Calif.-based real-estate research firm. The report found that O'ahu's home foreclosure rate rose 68 percent in the first half of the year, to 286 homes, compared with 170 foreclosures in the first half of 2006. However, the O'ahu rate (which came out to about 1 in 1,151 households) was still the fourth-lowest among the 100 largest U.S. metropolitan areas.