American homeowners now $745 billion underwater on their mortgages, according to First American CoreLogic.
Sounds low to me.
2.8 million properties foreclosed in 2009.
And the trend? Bound to get even worse. Record high default rate now, as over 13% of homeowners are behind on their mortgage payments.
Why? More ARMs (Adjustable Rate Mortgages) resetting this year and next, with expiration of teaser rates, payments will go up, more mortgage defaults, more foreclosures.
Not to mention the interest only mortgages, which are not sub-prime, which switch over to an amortized payment, $47 billion in the next year, $80 billion in the next two years.
Mortgage payments will go up 15%, more if interest rates go higher. And there is virtually no room for them to go lower.
And 61% of the modifications actually agreed to by our mortgage company friends since October 1, 2008, are in default.
Government’s solution? Hey, if we pay the banks some of their losses, maybe they will finally start to write down principal balances.
Only 21,000 of the loans modified in the third quarter of 2009 included principal writedowns, or deferrals.
My guess, more deferrals than actual writedowns. One reason, investors are suing when principal is written off.
What good does a deferral do for the homeowner?
My favorite quote in the linked to Business Week story; ”Mark Zandi, the chief economist for Moody’s Economy.com, who has testified before Congress on housing issues, proposes that banks receive a federal match of $1 for every $2 in principal reductions they offer to homeowners who were victims of predatory lending practices.”
So, let’s get this straight, mortgage company breaks the law, lends money it should not, probably cheating the homeowner.
Homeowner now stuck in home worth less then is owed, with unaffordable payments.
Remedy?
Another bailout for the crooked mortgage companies.
Well, they did spend enough of their ill gotten gains to buy both political parties, as each has supported TARP and further bailouts that have insulated the mortgage and banking companies from the consequences of their own actions, at the expense of you and me, the taxpayer.
Foreclosure Crisis Deepening
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[...] Default means, not keeping up your side of a contract, like, not making mortgage payments on time, which usually leads to a foreclosure. [...]