Foreclosure rates will soon decline, so says the Mortgage Bankers Association (MBA), the main mouthpiece for our nation’s mortgage lending institutions. In the fourth quarter of 2009, the delinquency rate for all outstanding loans slipped to 9.47%, down from 9.64% in the third quarter of 2009. Unless a delinquency is cured, foreclosure usually begins within five months by recording a notice of default (NOD).
Furthermore, Jay Brinkman, the MBA’s chief economist, says the shrinking rate of new loans going into delinquency means “…the size of the problem now is about as bad as it will get,” implying a one-month, downward slip in the 30-day delinquency rate indicates a bottom to the foreclosure crisis.
The report also draws a connection between jobs and mortgage delinquencies, highlighting the relationship between those able to pay a mortgage and those with a job. No mention of the dreaded negative equity problem.
first tuesday take: The fact that fewer homeowners are defaulting is a bright spot in these troubling times, a reason for an economist’s optimism.
One of the facts weighing in is the millions of homeowners still wrangling with lenders to obtain permanent loan modifications — and 60% of those who get one will still re-default and end up losing their home to foreclosure. Optimism about the future is necessary to motivate individuals to be creative; to take risks in a gamble to earn more money — despite a lack of certainty about what the future holds. For those talented optimists who act by taking on additional risks (buying property, leasing space, borrowing money or hiring more agents), they must do so based on their knowledge of information presently available which will affect their future if they are to succeed. The results of their gamble will be based on the quality of information they obtain and their desire to learn.
To imply that the foreclosure situation is “about as bad as it will get” is not instructive; at worst it is misleading. Many more delinquencies than foreclosures are to come by the third quarter of 2010 as even more of the notorious five-year adjustable rate mortgages (ARMs) are scheduled to reset upward between 2010 and 2011. We also know lenders have been dragging their feet on delinquencies, delaying foreclosure to avoid reporting their losses. Lenders in California now take seven months to get from the recorded NOD to the trustee’s sale.
Nevertheless, the MBA gets it right when it says mortgage delinquencies mirror the pattern of employment. This correlation — a simultaneous loss — has been pointed to time and again: jobs move real estate. Having the foresight to see how jobs and real estate move in tandem, one would think the minds at the MBA would look at the stagnant state of job numbers and realize we are nowhere near being out of the woods.
But these issues should not deter the well-informed, optimistic individuals from planning and acting to create their own futures. An optimist will never let a crisis go to waste. Get informed on it, understand it, organize to act, then DO something. Do not fuss and do not standstill. [For more information on California employment numbers, see the February 2010 first tuesday article, “Jobs Move Real Estate.”]
Re: “Delinquencies, Foreclosure Starts Fall in Latest MBA National Delinquency Survey,” from Mortgage Banker’s Association
I don’t buy it. The delinquency rate is still going up. I have looked at the FDIC data and 2009Q4 did not go down it went up substantially, at least not for the top 25 largest banks.
2009Q3 = 9.5% (108.6B loans defaulted of 1144B total)
2009Q4 = 10.8% (123.9B loans defaulted of 1144B total)
See the data for yourself here:
http://www.thehardmoneypros.com/Top25_Largest_Banks_Defaulted_Loans.shtm
How in the world can we possibly be seeing a decline in foreclosures? It was announced in January that over $41.6 BILLION in residential real estate loans will be converting from INTEREST ONLY to ADJUSTABLE RATE LOANS and that once these loans convert, it is predicted that over 85% will be in foreclosure within 6 months from the date of their conversion! Also, it was announced this past JANUARY that over $64.6 BILLION in COMMERCIAL REAL ESTATE LOANS entered default and are now being foreclosed! If commercial real estate is being foreclosed that means that ALL of the tenants will be dispersed and probably will be losing their residential real estate loans as well! It was also disclosed in January that between 2010 and 2014 over $1.4 TRILLION in COMMERCIAL REAL ESTATE LOANS WILL BE FORECLOSED!
The HERRITAGE FOUNDATION has predicted that as a result of the OBAMA HEALTH CARE bill, once it becomes law over 2 MILLION PEOPLE will lose their jobs and there is a very good chance that, like in EUROPE, over 20% of all doctors will quit practicing medicine because of SOCIALIZED MEDICNE!
If the CAP and TRADE BILL becomes law, and the EPA announced in DECEMBER that they were going to start working on their own version in APRIL, over 2.5 MILLION PEOPLE will lose their jobs within 6 months from the date it becomes law! (The U.S. Supreme Court ruled last year that the EPA can enforce their own interpretation as to CO2 emission standards!)
The REAL unemployment rate is actually 17.4% not the 9.7% the OBAMA ADMINISTRATION has been quoting according to the HERRITAGE FOUNDATION and when the STOCK MARKET CRASHED IN 1929 the unemployment rate went to 15%! When Franklin Delano Roosevelt signed the tax bill of 1933 the unemployment rate jumped to 25% and stayed there until WORLD WAR II broke out! Economic Historians state that the GREAT DEPRESSION started in 1933 with F.D.R.’S massive tax increase and lasted through the war, in fact after WORLD WAR II we had a recession that lasted until the KOREAN WAR and then we had another recession that went from 1953 through1961 after J.F. K. signed his tax cuts into law (J.F.K. is the ONLY DEMOCRAT in the history of the DEMOCRAT PARTY that cut taxes!)
Therefore, with the massive tax increases that are going to start taking place next JANUARY (the BUSH TAX CUTS WILL END THIS YEAR) and ALL OF OBAMA’S TAX INCREASES WILL START NEXT YEAR AS WELL, there will be massive unemployment as a result and some economists are predicting unemployment could reach over 20% or higher over the next TWO YEARS!