Mortgage defaults in Hawaii lag nation

The numbers are rising but are still far below the average

Mortgage loan delinquencies and foreclosures in Hawaii rose in the fourth quarter of 2006, but still remain far below the national average.

The delinquency rate for loans on one- to four-bedroom homes grew to 2.40 percent in the fourth quarter from 1.97 percent a year earlier, while the percentage of loans in foreclosure at the end of the quarter increased to 0.34 percent, up from 0.21 percent.

"We are coming off a period of extremely low delinquencies, so nearly all the statistics are showing a rise," said Russell Miyashiro, president of the Mortgage Bankers Association of Hawaii, which released the fourth-quarter delinquency rates yesterday.

However, Hawaii's delinquency rate was about half the national rate of 5.31 percent last quarter. The national foreclosure rate at the end of the quarter was 1.19 percent.

In 2003, Hawaii saw a surge in new mortgages and refinance loans because of low interest rates and home prices. As costs have risen over the past four years, home owners are increasingly strapped for cash leading to more loan defaults, said Paul Brewbaker, Bank of Hawaii's chief economist.

"The price of oil has doubled and the cost of living has increased dramatically," Brewbaker said. "It's typical -- you get about four years out and you start to see where the problems are."

Hawaii also is seeing the end of a real estate cycle, in which over the past two years some lenders followed lower underwriting standards to hold on to business as new home production declined, he said.

Rodney Shinkawa, Hawaii Bankers Association executive vice president, said, "Prices and volumes have leveled off because of the activity in the last two years and we certainly are seeing the rise in delinquencies following the national norm."

However, Hawaii has a long-standing reputation for relatively low delinquency and default rates compared to the rest of the nation.

"We have good borrowers in Hawaii. That's one of the reasons why we're below the national norm," he said. "It's not going to be as alarming as certain areas on the mainland."