Everett mortgage: No Recovery Without Jobs

Foreclosures on prime mortgages insured by the Federal Housing Administration rose to three-decade highs in the third quarter, driven by the biggest job losses since the Great Depression.

One out of every six FHA mortgages was late by at least one payment and 3.32 percent were in foreclosure, the highest for both since at least 1979, the Mortgage Bankers Association said today. The delinquency rate for prime fixed-rate mortgages, considered home loans with the least risk, rose to 5.8 percent and the foreclosure inventory rose to 1.95 percent, the highest since at least 1972.

Homeowners are falling behind on their mortgages as the U.S. has lost more than 7 million jobs since December 2007, driving the unemployment rate to 10.2 percent in October, it’s the highest rate since 1983. Declining home prices in most markets also are preventing many owners from selling their properties. Many are just walking away and leaving the keys on the counter.

If you do not have a job you can’t pay the mortgage. Without a job even food becomes a problem. The bottom line is without jobs nothing happens.

The share of all types of mortgages with one or more payments overdue climbed to a record seasonally adjusted 9.64 percent in the third quarter. The foreclosure inventory increased to 4.47 percent from 4.3 percent. Both were the highest in 37 years of data. REO (Real Estate Owner by banks) property is a hidden force that will delay the recovery. Many estimate that more than 600,000 foreclosed homes fall into this category. These are properties that the banks took back and have not put on the Market yet. I think they are waiting to see if the markets recover so they can sell them at a better price. Thus avoiding showing the huge loses if they sold right now.

The percentage of mortgages on which foreclosure actions were started was a record 1.42 percent. New foreclosures on prime fixed-rate mortgages  increased to 0.71 percent from 0.67 percent, while FHA mortgage foreclosure rose to 1.31 percent from 1.15 percent.

Sub prime adjustable-rate foreclosures starts dropped to 4.92 percent from 5.52 percent and the total foreclosure inventory for the types of loans that sparked the global financial crisis rose to 24.7 percent from 24.4 percent.

Defaults on FHA mortgages, which require down payments as small as 3.5 percent, may create another lending crisis, Toll Brothers Inc. Chief Executive Officer Robert Toll said yesterday.

“It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money,” said Toll, the head of the largest U.S. builder of luxury homes. But I don’t think so. FHA mortgage requirements are much higher than the sub primes were.

FHA’s Reserve Ratio Falls but that is only part of the story

The FHA’s insurance reserve ratio fell to 0.53 percent, the lowest level in history, and more steps are needed to shore up the agency that guarantees one of every five single family loans. That ratio, the one in five, is growing larger ever day. But FHA has other reserves that are at all time highs.

While the insurance fund’s capital ratio is at an all-time low those who say FHA is the next sub prime- mortgage crisis are wrong. The quality of the loans FHA insures is actually very good.

A report yesterday showing an unexpected drop in housing starts. This highlighted how the property market remains reliant on government support to sustain a recovery. Just how unexpected could it be, the damn credit was set to expire at the end of November.  I always wonder why a drop or an increase in some economic indicator is so unexpected. Aren’t these the “experts”. Homebuilding virtually stopped as builders waited for the Obama administration to extend an $8,000 housing tax credit for first-time buyers. The credit helps but many think that the credit only accelerates purchases that would have been made regardless of the credit. The credit has been expanded to a $6500 credit for “move along buyers.” I see this as the only real tax benefit that our government has done that will help the economy.

Builders broke ground about 529,000 homes at an annualized pace in October, down 11 percent from the previous month and the fewest since April’s all-time low.

I think it is obvious that there will be no lasting improvement of our economy until we have a job recovery.

As Featured on ArticleCity.com