America’s mortgage woes continue as the massive amount of home loans continue to wallow in uncertainty. According to Reuters columnist Karen Wutkowski in an article dated 9/30/09, “The weak economy continued to drive up the number of delinquent mortgages. The number of mortgages delinquent 30 to 60 days jumped 10.9 percent during the second quarter to 3.2 percent of all mortgages covered by the report. The number of mortgages that were more than 90 days delinquent increased 11.5 percent, rising to 5.3 percent of serviced mortgages.” These numbers are courtesy of the Office of the Comptroller and Currency, and the Office of Thrift Supervision. Combining these two figure yields a total delinquency figure of 4.25 percent.
Additionally, Wutkowski reported that home foreclosures rose 16 percent to 2.9 percent of total serviced mortgages. The article also stated that home retention actions rose 21.7 percent. Home retention actions are taken by lenders in order to keep homeowners in their houses, and paying their mortgage in some fashion. Such actions include but are not limited to payment modifications and interest rate reductions.
How Much Money
To put these numbers in perspective it is important to realize how much mortgage debt exists in the United States. A Federal Reserve bulletin dated Dec. 2008 reports the total amount of mortgage debt as of the end of the second quarter in 2008 was 14.78 trillion dollars. A delinquency figure of 4.25 percent places upwards of 628 billion dollar of mortgage debt in jeopardy.
Is Help on the Way
The Obama administration has implemented a plan to address the foreclosure rate of the nation’s current mortgage portfolio. Speaking on an unnamed bank regulator’s report AP real estate writer Alan Zibel wrote in his Sept. 30 2009 article, “The report by highlights a significant challenge for the Obama administration's plan to tackle the foreclosure crisis, backed by $50 billion in money from the financial industry bailout fund.” Currently the foreclosure rate stands at 2.9 percent as reported by Karen Wutkowski. This rate represents 430 billion dollars currently in foreclosure. The Presidents funding for his foreclosure plan falls well short of the problem.
To further complicate matters, the Office of the Comptroller and Currency, and the Office of Thrift Supervision reports that more than half of homeowners who received payment modifications had at least two late payments within a year. Payment modifications are a reduction of monthly payment, interest, or both in order to keep a homeowner out of foreclosure; and to keep the loan profitable at some level.
The Silver Lining
The rate at which mortgages are either in a state of delinquency or are currently delinquent is moderating. A graph posted by Bloomberg.com shows that mortgage delinquency rates of 60 or more days late was 4.45 percent as on 1/31/07. That rate rose sharply to 17.93 percent as of 11/30/08. That is an increase of 13.48 percent. The same delinquency rate was 19.96 percent as of 1/31/09, which is a relatively modest 2.03 percent increase.
Trans Union is one of the nation’s three credit bureau reporting agencies. Vice President FJ Guarrera agrees by saying, “For the first time since the recession began at the end of 2007, the quarter-to-quarter growth rate for national mortgage delinquency showed a decrease.”
While the current real estate picture may be seen as grim, it seems the darkest days may have past. If the current trend continues, 2010 may show signs of real estate recovery.
Sources: newsroom.transunion.com
www.federalreserve.gov
www.reuters.com
www.ap.org
news.yahoo.com
Photo: www.morguefile.com
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