Posts (RSS)Job Losses Drive Third Wave of Foreclosure Homes Nationwide
The country is being hit by a third ware of foreclosure homes, caused by job losses and lack of overtime work, according to economists working with Moody’s Economy.com. They said the first wave of foreclosure homes was caused by the subprime lending collapse and the drastic fall in home prices while the second wave was caused by the adjustment of mortgage rates and the consequent rise in monthly mortgage payments.
The economists also said that homeowners whose houses are becoming foreclosure homes in 2009 are borrowers who really qualified for their loans and who have been able to pay their monthly payments for years. They just fell behind in their monthly payments in the last months because they have lost their jobs.
Economy.com analysts have estimated that about 60 percent of home loan delinquencies in 2009 will be caused by unemployment.
Moody’s Economy.com economist Mark Zandi said that the third wave of foreclosure homes is getting worse nationwide because of the rising number of unemployed and underemployed Americans.
The case of Kay and Robert Richards are illustrative of the foreclosure effect of unemployment. Since 2006, they have been able to pay their $1,300 monthly loan payments for the $172,000 home loan that they took out to buy a prefab home in Minnesota. Their business of transporting timber from a mill enabled them to earn around $70,000 every year and pay their mortgage payments.
But when their trucking business failed last year because of the downturn, their income was slashed as Mr. Richards was forced to accept whatever occasional assignment he can get from a local trucking company.
They have already accumulated a total of $10,000 in arrears. They have been trying to negotiate with their lender to lower their monthly payments to prevent their house from being added to inventories of foreclosure homes.
Based on real estate research firm First American CoreLogic, the number of delinquent mortgage loans classified as prime has increased in a four-month period by over 473,000 in February, putting the total number to more than 1.5 million. The value of total prime loans in default has surpassed 224 billion.
In states with high jobless rates, like California, the number of foreclosure homes has been rising at a fast pace. The jobless rate in California increased from 6.4 percent in March 2008 to 11.2 percent in March. Its rate of foreclosure for prime mortgage loans also increased almost three-fold to 1.81 percent.