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The latest data from the Mortgage Bankers Association shows that

a seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period (Q2), the highest level in the survey’s 55-year history.

The delinquency survey covers more than 44 million mortgages, meaning more than 286,000 loans entered the foreclosure process during the quarter.

Interestingly, driving the numbers were the states of California, Florida, Nevada and Arizona, which enjoyed housing boom the most in the recent years.

Were it not for the increases in foreclosure starts in those four states, we would have seen a nationwide drop in the rate of foreclosure filings. Thirty-four states had decreases in their rates of new foreclosure and the increases were very modest in the states with increases, other than those four ……

It might add some hope that housing market won’t crash nation wise.

Sub-prime has drawn a lot of attention due to recent financial liquidity injection. Another equally important part is jumbo loan. According to Bankrate.com, the average rate on a 30-year fixed jumbo loan stands at 7.4%, well above the 6.47% at the start of the year. That adds nearly $300 YTD to monthly payments on a $500,000 loan. Jumbo loans are mortgages that exceed $417,000 in most states — $625,000 in Alaska and Hawaii due to higher housing costs there. California definitely will get a hit due to the huge appreciation in property values over the past 15 years that makes jumbo loans common.

Worse, thanks to adjustable rate mortgage (ARM), a lot of mortgages will reset. Per IBD, an estimated 2.5 million mortgages to borrowers with weak credit will reset at higher rates by the end of next year while FHA only plans to save 240,000 families in the same period, which doesn’t cover jumbo loans. Obviously, Bush’s plan is running short for at least 90%. Don’t forget that mortgages with good credit might also foreclose because of credit crunch, weak job market, etc.

Finally, the job market became weaker. The nation lost jobs for first time in 4 years since August 2003, which is one of the first clear signs that the housing and credit woes are hurting the broader economy. At this moment, Federal Reserve has to cut interest rates to maintain the stability of the whole economic system. However, even with rate cuts, the downfall of both stock market and real estate market might still be inevitable. The real question is how far and how fast.

Last but not least, though it might be too early to say, short term, I believe that we have successfully escaped a major stock market crash like the one happened in Black Monday, 1987, due to financial liquidity injection from central banks across the world. This time, we had enough money pumped into the economic system before the stock market had the chance to panic. Let’s wait and see.