Have Mortgage Delinquencies Hit Rock Bottom?

It is baffling just how many homeowners are going belly-up in their loans, especially considering that there are copious mechanisms in place to save those who are facing foreclosure or even see themselves nearing the road to foreclosure. The foregoing not withstanding, there is a school of thought that suggest that mortgage delinquencies have not yet hit rock bottom. Economists state that seven out of 100 homeowners are currently delinquent on their mortgage loans.

What makes matters is the number of those who are barely hanging on to their homes and who are being laid off, overtaken by consumer debt, and also fell victim to the lure of easy equity when they could ill afford to take out any money from their homes. Now upside down in their loans, there is no chance of refinancing and rescue is available only by qualifying for one of the government programs. Perhaps it is the notion that homeowners are finally seeking help that makes the Mortgage Banker’s Association comment on a decline in new foreclosure filings.

Unfortunately, investors are not buying the good news, especially since the drop in foreclosures could be the loans currently on hold while awaiting a decision to see if homeowners are eligible to participate in any one of the governmental programs. Thus, there is a good chance that the actual number of halted foreclosures may be unduly watering down the foreclosure rates, seeing that not all halted foreclosures will actually result in saved loans. In these cases, the halted foreclosures may buy some time, but eventually become foreclosures nonetheless.

With the upset in the housing market, the upset in the employment numbers does not bring any good news. As a matter of fact, states that are considered ground zero for the mortgage meltdown – Nevada, Florida, Michigan, and California – also report skyrocketing unemployment as well as projected job losses that are yet to hit the ailing economies of these states. Speculations are rampant that further economic downturns are likely to happen. When this occurs, the next wave of foreclosures is going to continue dragging down the markets locally but also nationally.

As such, it is a safe bet that mortgage delinquencies have not yet hit rock bottom, and may actually still be in the mid stages of their freefalls. This is especially true considering that other forms of mortgages are now beginning to also join the subprime mortgages in their foreclosures. With so many consumers living from paycheck to paycheck, even the loss of only one or two such paychecks can hail fiscal disaster for the consumer, and by extension for the lender who holds the mortgage papers.

Although not saying so loudly, investors are leery to once again jump headfirst into the mortgage market and not even the government incentives are sufficient to have them change their minds. This of course begs the question what it will take to once again make them comfortable to invest in the housing market. Some speculate that only governmental coercion could accomplish this feat, while other hope that a slowdown in foreclosures will be enough for the more daring ones to once again infuse cash into the housing market.

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