Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation’s economic recovery.
A mortgage trade group reported Thursday that more than 13% of the nation’s mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That’s the highest figure since tracking began in 1972. California’s rate, 15.2%, was among the highest of all states.
The numbers underscore a worrisome trend. A spate of foreclosures — which began with speculators who walked away from their souring investments, then spread to high-risk borrowers who couldn’t make their payments when their low-interest mortgages reset — is now hitting unemployed homeowners with good credit scores, clean financial histories and conventional home loans.
The U.S. has shed 6.7 million jobs since the recession began, employment losses that have left even high-quality borrowers struggling. One in three new foreclosures from April to June was from a prime, fixed-rate loan, up from 1 in 5 a year earlier.
The rising tide of foreclosures could swamp positive economic trends such as improving home sales and a surprise increase in U.S. regional manufacturing, also reported Thursday.
“The broadening of the foreclosure crisis to include prime loans due to high and rising unemployment will delay a bottom in the housing market and threatens the economic recovery,” said Mark Zandi, co-founder and chief economist of Moody’s Economy.com.
It’s also a huge challenge to the Obama administration, which is pressuring banks to restructure troubled mortgages to keep borrowers in their homes. Such modifications are difficult to achieve when a family’s income is slashed. The Washington-based Mortgage Bankers Assn. predicts that U.S. job losses will continue at least until the middle of 2010, meaning that mortgage delinquencies and repossessed homes will almost certainly continue rising.
“We would expect delinquencies and foreclosures to peak sometime after that, probably at the end of next year,” said Jay Brinkmann, the trade group’s chief economist.
The U.S. jobless rate in July was 9.4%, down slightly from 9.5% in June, a 26-year high. California’s June unemployment rate was 11.6%. July figures will be released today.
The employment troubles are compounding a messy situation for banks. Faced with a burgeoning backlog of problem loans, loan-servicing giants such as Bank of America Corp. and Wells Fargo & Co. have gotten off …
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Tags: Banks, Business, Economy, financial, Homeowners, house, Housing Market, Investments, Job, loans, mortgage, pay, Recession, Unemployment
