The problem was the most severe in the industrial Midwest and former housing boom areas such as California and Florida, but economists warned the situation will get worse in coming months as an estimated 2 million adjustable rate mortgages taken out with low introductory interest rates reset to much higher rates.

The crisis is most severe in subprime mortgages, loans provided to borrowers with weak credit, but it is now spreading to other types of mortgages, according to a quarterly report released Thursday by the Mortgage Bankers Association.

That report showed the number of homeowners who got foreclosure notices in the April-June quarter hit an all-time high of 0.65 percent, up from 0.58 percent in the first three months of the year. It marked the third consecutive quarter that a new record has been set.

The rising defaults in subprime mortgages have roiled global financial markets in recent weeks, sending stock prices on a roller-coaster ride as investors wonder which big bank or hedge fund will be the next to report huge losses from subprime mortgages that were bundled into securities and resold to investors.

Both President Bush and Federal Reserve Chairman Ben Bernanke tried to calm fears late last week. Bernanke pledged the central bank would "act as needed" to limit any adverse economic effects from the market turmoil.

Bush announced changes in the Federal Home Administration insured-loan program to help combat the expected wave of foreclosures and also answer attacks from Democrats that his administration has been slow to respond to a growing crisis in mortgage foreclosures.

Democrats criticized Bush for not going far enough and vowed to push more aggressive legislation through Congress, not only to help homeowners facing foreclosure but also to attack predatory lending practices they contend led to the crisis.

Sen. Charles Schumer, the chairman of the Joint Economic Committee, said the new mortgage delinquency numbers should serve as a wake-up call to Congress and the administration that urgent help is needed. Schumer is seeking $300 million in federal support for nonprofit mortgage counseling groups which he said were "the best defense against the coming storm of foreclosures throughout the country."

Private economists warned the worst slump in housing in 16 years and the turbulence in financial markets from a resulting serious credit squeeze could push the economy into a recession as more borrowers fall into default, dumping even more homes onto an already glutted market.

"You have a lethal combination of higher mortgage payments, lower house prices, a weaker job market and more cautious lenders," said Mark Zandi, chief economist at Moody's Economy.com. "That is a very noxious mix and it is the reason for this surge in foreclosures."

Zandi put the possibility of a recession at 40 percent, almost four times the possibility he had estimated in July, before the current credit crisis hit.

He said defaults will not peak until next year, reflecting a wave of introductory mortgages that are just now resetting from low "teaser" rates. Those resets can in many cases mean an extra $250 to $300 in higher monthly payments on the typical $1,200 monthly mortgage.

The MBA survey found that the delinquency rate, which tracks the number of people who are behind in their payments but have not yet entered the foreclosure process, was also up sharply during the spring. It rose to 5.12 percent of all loans, the highest level in five years and up from 4.84 percent in the first quarter.

The delinquency rate for subprime loans increased more sharply to 14.82 percent — up from 13.77 percent — in the first quarter. That marked the second-highest subprime delinquency rate on record after a 14.96 percent rate in the spring of 2002.

The delinquency rate for prime loans, offered to borrowers with good credit histories, also increased, but by a much smaller amount. It rose to 2.73 percent, up 2.58 percent in the first quarter.

Doug Duncan, the MBA's chief economist, said the worsening performance was the result of two major factors — heavy job losses in the Midwest states of Ohio, Michigan and Indiana, a region hard hit by heavy losses in the auto industry and other manufacturing industries, and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona.

"The percent of mortgages in Ohio that are 90 days or more past due or in foreclosure is still more than twice the national average and 1 percent of all the mortgages in Michigan had foreclosure actions started on them during the last quarter," Duncan said.

He said there were also significant problems in the neighboring states of Indiana, Illinois, Kentucky, Tennessee and Pennsylvania.

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected, in part, speculators walking away from mortgages they can no longer afford. They had jumped into the market during the boom, hoping to take advantage of rapidly rising prices by quickly reselling.

But now with the inventory of unsold homes at record levels, many speculators are defaulting on their mortgages. Those defaults are dumping more homes on an already glutted market.

"With so much supply out there to compete against, borrowers who can't pay their mortgages are behind the eight-ball," said Mike Larson, a real estate analyst at Weiss Research. "They can't sell to get out from under their obligations. As a result, more end up tumbling into foreclosure."

During the five-year housing boom, which ended last year, prices in the hottest areas surged as investors bid up the price of homes hoping to quickly resell them for a profit. Now with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.

Democrats on Wednesday blamed predatory lending practices for a large part of the current problems and said they planned to introduce bills aimed at halting such practices as aggressive marketing of subprime loans to unqualified borrowers.

Federal and state banking regulators issued guidance this week encouraging lending institutions to work with borrowers to restructure loans at more favorable terms rather than foreclosing on the existing mortgages.

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