Foreclosures Hit New High Point.

Washington -- The news isnt getting any better for people who work in default management departments.

The percentage of loans in the foreclosure process and the number of loans entering foreclosure both reached record highs in the third quarter as loan performance continued to weaken across the board.

While credit deterioration was widespread, the biggest increase in defaults was concentrated among adjustable-rate mortgages, especially those made to subprime credit quality borrowers.

While subprime ARMs account for only 6.8% of loans outstanding, those loans accounted for 43% of foreclosures that were started during the third quarter. Prime credit quality ARMs, at 14.5% of outstanding loans, accounted for 18.7% of foreclosures that were started, according to the Mortgage Bankers Associations quarterly delinquency survey.

MBA chief economist Doug Duncan said the third quarter marked the first time that the market felt the full combined effects of the collapse in the nonconforming mortgage securitization market, broad home price declines, economic weakness in much of the Upper Midwest and rate adjustments on ARM loans.

In Michigan and Ohio, the problem continues to be the declines in demand due to drops in employment and population that have left empty houses in cities like Cleveland, Detroit and Flint. In states like California, the problem is excess supply due to speculative overbuilding and properties coming back onto the market, he said.

In California, a hotbed of ARM lending, the number of foreclosure starts on subprime ARMs during the third quarter equaled the number from 35 other states combined, according to the MBA.