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Foreclosures Now Affecting People With Good Credit Ratings
The home loan crisis has reached a new level. Mortgage holders with good credit ratings now make up the majority of foreclosures as layoffs continue. A record high 12% of people with a mortgage were late on their payments during the first quarter according to the Mortgage Bankers Association. And experts predict this will continue into next year, beyond the projected peak of unemployment.
Key in the recession's onset, high-risk adjustable rate mortgages made to people with poor credit, is still a major factor in foreclosures. Currently, close to 50% of subprime ARMs are behind or already in foreclosure. In New York, New Jersey, and Florida, it's over 55%.
When scores of this type of borrower began going into default late in 2006, it caused many lenders to go under which sparked the financing crisis of summer 2007. All of a sudden businesses around the country were having difficulty obtaining financing for new orders or to cover payroll. Gross production of the economy started shrinking late 2007 and this has become the worst US depression since World War II.
The crisis has now started affecting homeowners who until now have managed to pay their bills on time. More than 5% of prime mortgage holders with fixed rates were behind or in foreclosure, twice the number from last year.
The worst hit areas are still California, Nevada, Florida, and Arizona. These four states, collectively account for more than 45% of the nation's foreclosures and also had the highest number of prime mortgages in default or foreclosure. All four have been hit hard by layoffs, especially in the housing sector. There have not been any signs of improving. Top economists expect the unemployment rate to peak in the middle of next year and foreclosures to level off about 6 months later.
The number of initial jobless claims went down slightly last week. But the number of people receiving benefits reached 6.79 million, a new record.
The continued rise in jobless people, which economists say will reach 10 million, indicates further struggles for the hurting financial system and the economy in general.
People generally have less money to spend on luxuries and even basic necessities.
And those without a job find it more difficult to get lenders to modify their loans, as many try to take advantage of President Obama's loan modification and refinancing program which he introduced early this year.
Marin Real Estate Blog
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