Foreclosures surge 42 percent in 2006

One out of every 92 households filed for foreclosure in 2006, suggesting that many homeowners are overextended in mortgage debt, group says.

January 25 2007: 8:30 AM EST

WASHINGTON (Reuters) -- The number of homes in the United States foreclosed by lenders rose 42 percent in 2006 from a year earlier in a sign that many homeowners have became overextended in mortgage debt, a real estate information service reported Thursday.

More than 1.2 million foreclosure filings were reported nationwide during 2006, which is a rate of one foreclosure filing for every 92 households, according to RealtyTrac, Inc.

The jump in foreclosures last year marks a return to normal levels as the housing market cools from multiyear highs of sales and appreciation, the company said.

Recent homeowners who believed the housing market would continue its break-neck pace or used flexible mortgages to make a purchase may be feeling a sting, the company said.

As much as $1.5 trillion in adjustable-rate mortgages are due to have their rates reset this year, according to the Mortgage Bankers Association. Many recent homeowners are already struggling to make those higher payments and are drifting toward loan default and foreclosure, said James Saccacio, chief executive officer of RealtyTrac.

"As more and more of these loans re-set, we saw a surge to finish the year, with the fourth quarter producing more foreclosure filings than any of the three previous quarters," Saccacio said.

While the increase in foreclosures could add to a glut in housing stock, "most local markets have been able to re-absorb foreclosure homes without seeing any major damage to the local economy," Saccacio said.

Colorado, Georgia and Nevada saw the highest foreclosure rates, the study found.