“I suspect that we are coming to the end of the housing downturn, as applications for new mortgages, the most important series, have flattened out. I think that the worse of this may well be over.” - Alan Greenspan, October 1, 2006

Thursday, May 28, 2009

Job Losses Spur Mortgage Defaults

Rising unemployment is leading to more mortgage defaults, a new survey shows.

About 12% of first-lien home mortgages in the U.S. were overdue or in the foreclosure process at the end of March, the Mortgage Bankers Association reported Thursday. That's up from 8.1% a year earlier. The trade group's quarterly survey covers mortgages on one- to four-family residences. At the end of the latest quarter, 8.2% of the loans were at least 30 days overdue and 3.9% were in the foreclosure process.

What started in 2006 as mainly a problem among subprime loans, those for people with weaker credit records, continues to spread to more prime borrowers. People who lose their jobs and find that they owe far more than the current value of their homes are more likely to give up on making payments. 

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