Why are foreclosures up?
Jay Brinkmann, MBAs Chief Economist, says it's jobs. Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%. Brinkmann says it's prime and FHA mortgages that are taking the worst beating. Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures. 33% of foreclosures started in the third quarter were on prime fixed-rate and loans and those loans were 44% of the quarterly increase in foreclosures. The foreclosure numbers for prime fixed-rate loans wi ll get worse because those loans represented 54% of the quarterly increase in loans 90 days or more past due but not yet in foreclosure. The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans. In contrast, both subprime fixed-rate and subprime adjustable rate loans saw decreases in foreclosures."
Eric- the subprimes and ARMs are stable for the moment as the FED keeps the interest rates artificially low. Once inflation sets in, and it has to if they want to increase the taxes collected which still don't put a dent into the debt- the ARMS will start hurting.
They say it's jobs because while they want you to look at jobs- you don't see what they don't want you to see. The job thing is an easy fix but you won't see gov't fixing that any time soon, smoke screens. Katerina
Many of the foreclosures are simply being dragged along because of morartoriums, failed modificiations, and failed short sale workouts.
The economy is still in shambles, Un employment is at a record level oh and the funky mortgages from 2006-2008 are still out there (3 & 5 year arms, Pay options, Neg am loans)