Province's delinquency rate rises for 19th month in a row.

Growing unemployment and the home-price slump are leading to more defaulted mortgages in Edmonton and across Alberta. Lenders began foreclosure proceedings against 1,571 Edmontonarea homeowners in the 11 months ended February 2009, up from 1,013 in the previous 12 months, according to the most recent statistics available through Alberta Justice.

Albertans have fallen at least three months behind on payments on 2,579 mortgages from major banks, according to April figures released by the Canadian Bankers Association.
Lenders typically begin pursuing foreclosures after payments have been missed for three months in a row. Although foreclosures have risen sharply in Alberta, they are nowhere near the levels experienced in the United States.

Alberta's mortgage delinquency rate for April stood at 0.54 per cent of all big-bank mortgages, rising for a 19th straight month. The rate has more than quadrupled in that stretch, going from one of Canada's lowest to the highest. "It's very rapidly gone from exceptional growth to rapid downturn," said Will Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals.

People who lose their jobs are the most likely to fall behind on payments. Alberta's unemployment rate has nearly doubled since last fall. "Layer on top of that what's happened to property values across the province," Dunning said. The resale market has picked up, but prices are well off the boom-time peak, when many bought homes in hopes of flipping at a profit.

"Because everyone had the full expectation that property values would do nothing but go up, people would do whatever they could--even sell themselves out of trouble," said Phil McDowell of Mortgage Alliance in Calgary.

"In the last two years, there's been a softening of the market ... that ability to sell their homes and get out of that debt they incurred might really not be an option for them."
"So you dig in your heels and wait until it rebounds, or you give up." Edmonton lawyer Bud Steen expects his firm will handle 1,200 to 1,400 foreclosure files this year.

"I went through the 1980s and started foreclosures when we were in the dark days of '82 and '83," Steen said. "We've had mini-bursts since then, but this is definitely the worst we've seen in the last 20 years."

Steen's firm handles cases from across the province. The number of foreclosure proceedings have been higher in southern Alberta, but Steen expects Edmonton numbers will increase next year if even more construction projects are delayed or cancelled.

Lenders began foreclosure proceedings against 3,407 Calgary-area homeowners between April 2008 and February 2009, more than twice the number that started in Edmonton during the same time period.

ForeclosuresCanada.com,which tracks Alberta court filings for property investors--but doesn't provide data with the same level of detail as the province--listed two-and-a-half times more Edmonton foreclosures between this January and early May than in the same period two years ago. In Calgary, the numbers on the website increased by about three times over the same time period.

The U. S. housing market has been hit with several times more foreclosures than Alberta is experiencing. The latest data suggests more than one in 12 U. S. mortgage holders is in arrears, compared to roughly one in 200 in Alberta. McDowell of the Mortgage Alliance noted Alberta's delinquency rates were above current levels throughout the mid-1990s, so there shouldn't be cause for alarm.

"If anything, we're going back to a normal marketplace." The figures released this week only cover mortgages by eight major banks, which account for roughly 60 per cent of all mortgages in Canada. A few "niche" lenders briefly entered the Alberta market during the boom and offered high-risk, high-rate mortgages with more foreclosures and delinquencies that don't show up in the bankers' association stats.

"They may have, on a percentage basis of portfolio, fairly high arrears that we'd just say, 'Whoa, that's scary,' " said McDowell, who is also past-president of the Alberta Mortgage Brokers Association.

Source - Edmonton Journal