Mounting joblessness fuels US housing crisis
By Saskia Scholtes in New York
Published: August 20 2009 17:59 | Last updated: August 20 2009 17:59
More than one in every eight homeowners with a mortgage was behind on home loan payments or in some stage of foreclosure at the end of the second quarter, as mounting unemployment aggravated the housing crisis, the Mortgage Bankers Association said on Thursday.
The percentage of loans that were in foreclosure or at least one payment past due rose to 13.16 per cent, the highest increase since the MBA began keeping records in 1972 and a jump of more than a percentage point since the first quarter.
Jay Brinkmann, chief economist at the MBA, said signs were growing that mortgage performance is being affected more by unemployment than by the structure of risky home loans, indicating a new stage in the foreclosure crisis that may not be easily addressed by government loan modification programmes.
While the proportion of foreclosures started on borrowers with subprime adjustable-rate mortgages fell dramatically in the second quarter, foreclosure starts on traditional prime fixed-rate loans saw a dramatic increase. Prime fixed-rate loans accounted for one in three foreclosure starts at the end of the second quarter. A year ago they accounted for one in five.
“There has been a shift in the problem from one driven by the types of loans to one driven by macro problems in the economy and drops in house prices,” said Mr Brinkmann.
Florida continued to be the worst state in the union for mortgage performance, closely followed by Nevada. Florida has 12 per cent of its mortgages in some stage of foreclosure – the highest in the country – while 23 per cent of the Florida mortgage market is at least one payment overdue. This is almost twice the national average if Florida’s performance is excluded.
The next highest states were Nevada at 21.3 per cent of loans at least one payment past due, Arizona at 16.3 per cent and Michigan at 15.3 per cent.
The new figures come as mortgage lenders and servicers, which collect home loan payments, begin implementing President Barack Obama’s housing market rescue plan. The second quarter saw 38 mortgage servicers modifying home loan terms under the programme, sending out more than 400,000 modification offers and beginning 230,000 trial modifications.
While these programmes have had an impact on holding foreclosure rates below where they would otherwise be, Mr Brinkmann said many of the foreclosures involved homes that were vacant, borrowers who no longer had jobs, or loans where there was fraud involved.
As a result, said Mr Brinkmann, “it is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves.” Mr Brinkmann expects the peak in foreclosures to lag the peak in unemployment by around 6 months.
By Saskia Scholtes in New York
Published: August 20 2009 17:59 | Last updated: August 20 2009 17:59
More than one in every eight homeowners with a mortgage was behind on home loan payments or in some stage of foreclosure at the end of the second quarter, as mounting unemployment aggravated the housing crisis, the Mortgage Bankers Association said on Thursday.
The percentage of loans that were in foreclosure or at least one payment past due rose to 13.16 per cent, the highest increase since the MBA began keeping records in 1972 and a jump of more than a percentage point since the first quarter.
Jay Brinkmann, chief economist at the MBA, said signs were growing that mortgage performance is being affected more by unemployment than by the structure of risky home loans, indicating a new stage in the foreclosure crisis that may not be easily addressed by government loan modification programmes.
While the proportion of foreclosures started on borrowers with subprime adjustable-rate mortgages fell dramatically in the second quarter, foreclosure starts on traditional prime fixed-rate loans saw a dramatic increase. Prime fixed-rate loans accounted for one in three foreclosure starts at the end of the second quarter. A year ago they accounted for one in five.
“There has been a shift in the problem from one driven by the types of loans to one driven by macro problems in the economy and drops in house prices,” said Mr Brinkmann.
Florida continued to be the worst state in the union for mortgage performance, closely followed by Nevada. Florida has 12 per cent of its mortgages in some stage of foreclosure – the highest in the country – while 23 per cent of the Florida mortgage market is at least one payment overdue. This is almost twice the national average if Florida’s performance is excluded.
The next highest states were Nevada at 21.3 per cent of loans at least one payment past due, Arizona at 16.3 per cent and Michigan at 15.3 per cent.
The new figures come as mortgage lenders and servicers, which collect home loan payments, begin implementing President Barack Obama’s housing market rescue plan. The second quarter saw 38 mortgage servicers modifying home loan terms under the programme, sending out more than 400,000 modification offers and beginning 230,000 trial modifications.
While these programmes have had an impact on holding foreclosure rates below where they would otherwise be, Mr Brinkmann said many of the foreclosures involved homes that were vacant, borrowers who no longer had jobs, or loans where there was fraud involved.
As a result, said Mr Brinkmann, “it is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves.” Mr Brinkmann expects the peak in foreclosures to lag the peak in unemployment by around 6 months.
