Feldman Law Center - News by Feldman Law Center — Toxic mortgages approved for borrowers that couldn’t afford them may have started the meltdown in mortgages but the current wave of foreclosures is being fueled by rampant unemployment across the country. Evidence of that is now being provided by the acceleration of defaults in mortgages granted to high credit score borrowers, commonly known as prime mortgages. The report of May’s 9.4% unemployment rate is more bad news for lenders and their investors as the biggest sector of the mortgage market is now showing a default rate greater than that of the sub-primes.
The rising unemployment rate, which has increased every month since the first quarter of 2007, is threatening to reverse any of the currently small gains being made in stabilizing the housing market. In many cases, unemployment can trump any mortgage relief effort short of foreclosure due to the fact that the best terms on a home loan modification, for example, are not going to work if the homeowner can’t write a monthly mortgage check to the lender.
Regardless of the type of mortgage, the current default ratios are stunning. In total a record 12 percent of homeowners with a mortgage were behind on their payments in the first quarter, the Mortgage Bankers Association (MBA) said Thursday. The mortgages which started blowing up first, adjustable rate mortgages for sub-prime borrowers are still a significant factor in foreclosures. Today, almost half of all subprime ARMs are past due or in foreclosure. In states like New Jersey, Florida, and New York those rates exceed 55%.
The riskiest tranches of the adjustable subprimes began defaulting en masse in the fourth quarter of 2006, starting a domino effect of sub-prime lender closures leading to the freeze of the credit markets in the third quarter of 2007. The general opinion at the time was that the defaults would be contained to the sub-prime market with the possibility of some spillover to the most marginal of the Alt-A loans. Instead, foreclosures and unemployment began working as mutually re-enforcing factors and defaults climbed the ladder of credit scores, reaching and accelerating defaults in the prime mortgages in the second half of 2008. Six percent of the fixed rate primes are now past due, in default, or foreclosure, an increase of 100% over this time last year. The dynamic between unemployment, foreclosures and their effect on the economy has led to the longest recession since World War II.
Four states, California, Arizona, Nevada, and Florida represent almost half of new foreclosures and carry the highest number of delinquencies in fixed rate prime mortgages. It’s no coincidence that these states carry some of the highest unemployment numbers in the country as well.
The relationship between unemployment and foreclosures now has industry watchers wondering whether the Obama Administration is spending its energy, and funds, on the right target. Their reasoning is that if unemployment continues to grow at the current pace, the “Making Home Affordable” plan won’t matter because homeowners are not going to be able to afford even the best offers for a home loan modification if they’re not working. A better approach, they say, would be for the government to take a regulatory role on the mortgage market, develop an accreditation program for law firms doing home loan modifications, and put their main focus on boosting the economy.
About Feldman Law Center
The Feldman Law Center was founded for the purpose of negotiating loan modifications on behalf of their clients. These negotiations have two major goals; to reduce monthly mortgage payments to a level of affordability for the homeowner and to either stop or avoid foreclosure proceedings. The mission at The Feldman Law Center is to provide the highest level of professional service while delivering the best possible result on each loan modification we negotiate on the behalf of the families we represent.
Having negotiated over 500 attorney driven mortgage loan modifications, we realize that each homeowner’s situation is unique and that each modification may require a different approach than the one before it. To that end, we can always call on our 25 years of negotiating, knowledge, and real estate experience to provide the most optimal solutions for each family’s situation. While we are negotiating your mortgage loan modification with your lenders our friendly and compassionate team will keep you updated all the way on how the process is advancing.
The people at The Feldman Law Center completely understand the stress of being behind in your monthly payments and the sleepless nights that can be brought on by an impending foreclosure. Rest assured that we will stand with you all the way through the loan modification process and that we are driven to get the best outcome possible for you and your family. If you are struggling with your monthly payments and worried about the threat of foreclosure, we can help. Call The Feldman Law Center today at 800-588-0425 or visit www.feldmanlawcenter.com.
No comments:
Post a Comment