New wave of delinquencies on the way
A new forecast sees delinquent mortgages nearly doubling by the end of next year. Homeowners with adjustable-rate mortgages, in particular, are in danger of getting squeezed. Jeff Tyler reports.
A foreclosure sign in front of a house for sale in Stockton, Calif. (Justin Sullivan/Getty Images)
More on Sustainability, Politics, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: Speaker Pelosi brought up the TARP this afternoon when she was talking about money for Detroit. That's how the White House, this one or the next one, might find its way clear to bailout carmakers if loans can't pass Congress. One thing the TARP hasn't been used for yet is mortgage relief. We learned today the worst of the housing crisis may not be behind us. One of the big consumer credit companies came out with a disheartening bit of data that the number of delinquent mortgages is expected to nearly double by the end of next year. Adjustable rate mortgages in particular. That means homeowners who aren't having any trouble paying their bills right now could get squeezed as their mortgages reset. Marketplace's Jeff Tyler has more.
Jeff Tyler: Historically, the number of people 60 days late with mortgage payments has hovered around 2 percent.
Ezra Becker: We expect it to more than triple from historic norms.
That's Ezra Becker with the credit bureau, TransUnion, which did the analysis. He expects mortgage delinquencies will be near 8 percent by the end of next year.
Becker: Not only is it rising. But it's rising at an increasing rate.
So what can be done? Barry Zigas with the Consumer Federation of America points to work being done by the FDIC.
Barry Zigas: It is possible to help home-owners avoid foreclosure and default by intervening quickly and energetically to adjust the mortgage payments to a level that they can afford. And we just haven't seen enough of that across the government. And that is one of the reasons we are going to see more delinquencies than we might otherwise have.
Part of the problem is the bonds that are tied to mortgage debt. Zigas says those bonds have been sliced up and sold to investors all over the world.
Zigas: The government should be focusing more attention on how to move these bonds into an ownership structure where they can be dealt with, and they've been very slow to do so.
If foreclosures are allowed to increase, more bonds will go bad. Helping individual home-owners gets messy. Mark Zandi, chief economist with Moody's Economy.com, points out the challenge of deciding who gets help.
Mark Zandi: If you start helping home-owners, then other home-owners who are just struggling to get by will raise their hand and say, 'Well, why not help me? I deserve help as well.'
If you need help, talk to your lender.
Banks are much more likely to work out some deal if you contact them before you stop sending them checks.
I'm Jeff Tyler for Marketplace.
Comments
Comment | Refresh
From Westminster, CO, 12/04/2008
I have to disagree with Mr. Tyler's remarks, "If you need help, talk to your lender. Banks are much more likely to work out some deal if you contact them before you stop sending them checks." I contacted my lender in October because I was concerned about making future mortgage payments--I am self-employed and business was down. My lender said they couldn't do anything for me until I was 60 days past due. Fortunately, business has improved and I remain current on my bills.
From Baltimore, MD, 12/04/2008
Given the reality of the real estate market, I find it absurd that the FHA is willing to finance mortgages at 95% of value. In a few months, anyone who borrows at that level will owe more than the house is worth. Isn't it time to require at least 20% down? This would provide some cushion, and make people think carefully about the commitment they are about to make.
From Berkeley, CA, 12/02/2008
It was great to finally hear someone point out one of the great absurdities of the credit "crisis." It is incredibly frustrating to think that we would be more likely to get a favorable interest rate by not paying our mortgage than we would by paying it.
That a working couple with great credit and income cannot refinance a mortgage due to declining property values is a crime AND a HUGE problem for the economy going forward. My wife and I would love to refinance the house we bought last summer when rates were high, but cannot do so, thanks to declining property values. We would love to buy a new car and would do so if we could lower our mortgage payment. We can't do that, so the car will have to wait for a better housing market--and so will the automakers.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.