Current State Of US Mortgages

Mortgage woes were at their highest during the fourth quarter of 2008, with over one in ten homeowners late on their payments.

In a report, the Mortgage Bankers Association (MBA) said that the delinquency rate for mortgages on residential properties (with one to four units) comprised 7.88% of all outstanding loans at the end of the fourth quarter of 2008. It’s the highest since the Mortgage Bankers Association began collecting data in 1972. It is also 0.89% higher than the third quarter of 2008. However, only 3.30% of loans were being foreclosed at the end of 2008, up only 0.33 points from the third quarter of 2008.

The MBA based its report on a survey of 45.4 million loans granted by mortgage companies, commercial banks, thrift banks, credit unions and other financial institutions.

The MBA attributes the relatively low ratio of delinquencies to foreclosures due to halt actions by many banks and government mortgage finance firms Freddie Mac and Fannie Mae. The group points out that many financial institutes are either working on modifying loan terms, complying with the guidelines of different investors, or are simply encountering delays in different locales.”
Delinquency in mortgage repayments hit a record high as unemployment rates soar to a 15-year high and the value of real estate properties tumble.

First American CoreLogic reports that over all, the US real estate market lost $2.4 trillion in value in 2008, while the unemployment rate jumped to 6.9% in the fourth quarter of 2008, which is the highest since 1993. CoreLogic points to unemployment as the major cause of repayment delinquencies.

The group also said that over 8.3 million of mortgage borrowers owed more on their loans in the fourth quarter of 2008 than what their property was worth, when the recession cut home values by $2.4 trillion in 2008. If home prices drop to another 5%, an additional 2.2 million mortgage borrowers will be underwater.

According to Norm Miller, the director of real estate programs at the University of San Diego’ School of Business Administration, one-third of homeowners will find themselves in a “rational default” situation, when they’ll stop making mortgage payments if the value of their houses drops 20% or more below than what they owe.