From yesterday’s New York Times, yet another ominous report about foreclosures by David Streitfeld.
According to the Mortgage Bankers Association, the total number of mortgages in foreclosure fell for the first time in nearly four years. Loans that are seriously delinquent (more than 90 days past due) dropped from 9.54 percent in the first quarter to 9.11 percent in quarter two.
Before we hold any celebrations, we need to realize that this might be a temporary respite in the foreclosure crisis. According to reports yesterday, as many as 4 million additional homes may go into foreclosure. Almost 15 percent of mortgages are delinquent or are in foreclosure.
Many experts say that we are approaching another wave of home price declines. There is more than 12 months worth of housing supply, and more is likely on the way. The number of houses actually turning into REO is increasing. Demand for houses has dissipated since the expiration of the first time home buyer tax credit at the end of April. I have seen forecasts that predict home price declines of anywhere from 5-20 percent over the next 6 months-3 years. If this were to occur, many more borrowers would find themselves underwater, which will likely lead to more foreclosures.
All of this comes against the backdrop of unemployment that has been north of 9.5 percent for more than a year and shows few signs of improving in the short term.
This is going to be a long recovery indeed.
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