Ruh Roh: Delinquent Mortgages Aren't Just Increasing, They're Increasing *Faster*....

[BlooInBloo]

So much further to go, before we're out of these woods.

http://www.eschatonblog.com/2009/09/accelerating-pace.html

"Accelerating Pace

I don't know how we get past this problem.


Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.

August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed."

Link to primary source: http://www.reuters.com/article/newsOne/idUSTRE58K29E20090921

[appamado amata padam]

1. Shouldn't there be some kind of protections for homeowners

who lose their jobs? It wouldn't hurt the banks to wait a few months to get their money. They'd have to do that anyway if they foreclose. People are seeing years of work, saving, etc go down the drain.

A lot of people are being hurt, but maybe we should be limping along to the realization that homeownership isn't for everybody. All the laws are skewed to the banks' benefit, and some people aren't prepared for the additional taxes and expenses. I think some people would have been better off renting, and having that money for other things. And often, even if a house is paid for and passed down to a beneficiary, it just becomes a burden for them.

Maybe I am getting off-topic, but I hate to see people get in so much trouble for the romantic ideas attached to "owning a house."

[BlooInBloo]

3. You would think that numerous such ideas would be in the banks' interest...

as well as the mortgage payer's. But banks resolutely resist all attempts at renegotiating their loans.

A guess at some of salient issues:

1) If the big banks do that, they won't be able to whine about needing a bailout. I.e., if they solved the problem themselves, they wouldn't be able to hold the country hostage, extorting $ from the government (or else they'll pull the trigger on the country).

2) The smaller banks are strongly incented to do similarly so that they can actually compete *at all* with the bigger banks

3) There are likely financial reporting regulations that are relevant here, for the various categories of loan recipient.


The overall solution, it seems to me is simply: don't allow banks (or other businesses) to get so big that their fall significantly endangers the US economy.

[Lucky Luciano]

7. Loan Modifications will cause markdowns for the banks

The banks are gambling that they can outperform loan modifications by maintaining the status quo. Even if you only move three months of payments to a further date, the bank would then have toacknowledge credit markdowns they may not have taken yet. All of it is basically shady.

[cbdo2007]

4. I think you're on to something here...talk about economic stimulus...

What if they would have said every homeowner in America could just have a three month push-back on their loan. They would just not pay for 3 months, to catch up in many cases or to stimulate the economy however they wish, but they wouldn't have 3 months off their loan. Instead, the bank would just add 3 months on to the end of their loan interest free (the details would have to be worked out so that it isn't costing consumers or the bank MORE money). Sounds like a win/win for everyone.

[SoCalDem]

5. Unfortunately when you borrow money , you cannot opt out of paying if you lose your income

unless you borrow from the National Bank of Mom.

This is precisely WHY people used to have to put down 25-33% in CASH, and banks used a formula to determine whether you could afford that house BEFORE they even talked turkey to you. Banks used to have their own appraisers, who were dispatched to look at that house, to see if IT was worth the trouble of making a mortgage for it.

When people bought a house, the bank was assured that you could afford it, you had significant "skin" in the game, and by the time someone had saved up that much money to put down, you likely were well into your 30's and had a secure career.

Of course this was before outsourcing, but the fact is this..more people were probably denied loans, than ever got them..and one someone had a mortgage, they set out to pay it off as fast as possible, and they usually stayed in that one house for a very long time.

Home loans used to have coupon-booklets, so you could prepay easily and get credit for the months..not just paid on "extra principal".. When tax refund time rolled around, many people would use it to pay ahead on their mortgages, for a few months, so they did not have to make payments for those actual months.

We used to do that on our car too..we'd make extra payments, and then not have to pay for the months we prepaid..

[appamado amata padam]

6. Thank you all

for your responses. There is a lot I don't know about - even though I took a Real Estate Law class! :-)

[MercutioATC]

2. Wait until the $8000 homebuyer tax credit expires on Dec. 1st...

Realistically, every home will decrease in market value by $8k. Home sales will decline further, values will fall, and even more people will dip below the equity/loan obligation line.

Combine that with increasing unemployment, and it's going to be interesting.

[Nikki Stone1]

8. For most of the middle class, their home was their main source of wealth.

Now that everything else--pensions, 401Ks, stocks--have been gutted, the home will be the last thing to go. The serfdom of America is at hand.