US property foreclosures up 65%

US property foreclosures up 65%

The wave of misery caused by America's sub-prime mortgage crisis engulfed more homeowners in April as foreclosures leapt by 65% year-on-year, adding to pressure on the White House to provide relief for stricken borrowers.

Banks filed foreclosure papers on 243,353 US properties last month according to RealtyTrac, an online marketplace for repossessed homes.

The figure was up 4% on March and experts suggested that the rate of increase would be higher were it not for a logjam at courtrooms in some areas, with over-burdened clerks taking several months to process paperwork.

"Although only 2% of households nationwide are in foreclosure, these properties contribute to already bloated inventories of homes for sale and put downward pressure on home values," said James Saccacio, chief executive of RealtyTrac.

America's south-western corner, where the property market was booming until last year, has been worst hit by the crisis. Nevada and California suffered the most foreclosures last month. Arizona jumped into third place after a 26% rise in filings, overtaking Florida.

The housing market meltdown has been a factor in forcing one Californian city, Vallejo, to file for bankruptcy. Saccacio said: "Property tax bases are eroding, putting municipal budgets in peril."

In Washington, a Democrat-led initiative to provide aid for homeowners will go before the influential Senate banking committee next Thursday.

The plan would permit struggling.....continued below

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borrowers to refinance their mortgages with loans backed by the US government. It would allow the Federal Housing Administration to stand behind $300bn (£155bn) in mortgages, at an estimated cost to taxpayers of $2.7bn.

It was overwhelmingly passed by the House of Representatives last week as 39 Republicans defied their party's leadership by supporting it. But President Bush has vowed to veto the measure on the grounds that it amounts to a "taxpayer-funded bailout for lenders and speculators".

Aid for homeowners has caused a bitter political argument. A Democrat congressman, David Wu, last week compared his opponents to the villainous slum landlord Henry Potter in Frank Capra's film A Wonderful Life, who turns hard-up families with children out onto the street.

But the Republican leader in the Senate, Mitch McConnell, has accused Democrats of adopting European-style "socialism", complaining: "It's pretty clear to me that the Democrat agenda is to turn us into France."

America's second largest provider of funding for mortgages, Freddie Mac, today said it was raising $5.5bn to overcome rising credit costs. The government-sponsored institution revealed a 13% increase in its first-quarter losses to $151m.

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