Mortgage Rate News

This weekend we celebrate the 4th of July. It’s a time when we commemorate the signing of the Declaration of Independence. Of course, the signing didn’t take place exactly on the 4th (more like shuffling people in and out to sign the document over the course of two or three days). But that’s not really what’s important. What is important is that on a horribly hot and muggy day more than two centuries ago, a Declaration was signed. And the world began a change that has led us here.

I sometimes wonder what the founding fathers would think if they saw us today. We can speculate all we want, but we really don’t know. At any rate, some would doubtless think things are on the right track, and others would probably be appalled. The leaders of our nation then were just as disparate as those leading our nation today. Where there are different people, there will always be differences of opinion.

No matter their opinions, though, it is important to remember that the signers of the Declaration put their livelihoods and their lives on the line. If things didn’t work out as they had, they would have all been executed as traitors. Such a decision is not to be made lightly, and who knows how different things might be now if that decision hadn’t been made. Would other leaders have made it 20 years or 50 years later? Would we have made it today? Perhaps.

Anyway, during this time of celebration and fireworks and burgers, I hope that you take a minute to reflect on the Declaration of Independence, our founding fathers, and what we can all do today to be better citizens. And perhaps you will do so while enjoying this stirring rendition of the United States Marine Band playing our national anthem.

Happy 4th of July!

Image by nuttyxander via Flickr

Today, the government released its non-farm payrolls unemployment report. The news, as expected, remains somewhat grim: The unemployment rate in June reached 9.5%. This is slightly better than the anticipated 9.6% unemployment rate.

The fact that things aren’t quite as bad as analysts expect offers cold comfort. Sure, the rate of rising unemployment is slowing, but employment is still declining. And things aren’t likely to improve soon. The Street reports on companies that have announced pending job cuts:

Yesterday, Gannet(GCI Quote), which publishes USA Today, said it plans to cut 1,400 jobs or 3% of its work force.

Last week, Kimberly-Clark(KMB Quote) said it would lay off 1,600 workers, while Monsanto(MON Quote) said it would cut 900 jobs .

General Motors(GMGMQ Quote) also adjusted its domestic, white-collar, job cuts forecast up to 4,000.

Clearly, the coming weeks will see an increase in unemployment as more people lose their jobs and line up to collect government benefits. All of this unemployment is also going to have an effect on the housing market.

Prime foreclosures likely to continue to increase

When people do not have jobs, they find it difficult to make mortgage payments. Unemployment benefits can’t completely replace an income, and the last few years have left many people bereft of emergency savings funds. This means that foreclosures are likely to rise as conditions continue to worsen (albeit at a slower pace) on the employment front. With expectations that the unemployment rate will actually hit 10% before economic recovery begins, more foreclosures seem inevitable. The President’s foreclosure prevention plan, while admirable and likely to be helpful in some cases, can’t help those who don’t have an income to aid them in qualifying for loan modification or refinance.

In the end, it is a wise idea to prepare yourself for unemployment now. And realize that you will have to make changes to your finances and your life for this possibility. It may not happen, but if you cut expenses now and work on building your emergency fund, you will be prepared in the even that you are laid off. And if your job survives this recession? Well, making better personal finance decisions will always get you ahead — no matter what the economy is doing.

The rate of foreclosure continues to increase. Foreclosures have been moving like a wave through borrowers as the recession has progressed. What started as something mostly confined to subprime mortgages has moved steadily through Alt-A mortgages and now to prime mortgages. Indeed, delinquencies on prime home mortgage loans have doubled, showing that the recession is really begin to take its toll on a number of borrowers.

Indeed, the recession is a big reason that prime borrowers are being hit be foreclosures. Bloomberg reports on the driving factor behind an increase in prime mortgage loan foreclosure:

“Job losses have mounted and even those with good credit that were able to get a prime mortgage are having a harder time making monthly payments with a loss of income,” said Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania.  …

“When home prices are down, many homeowners have negative equity, not just subprime borrowers have trouble but prime borrowers do as well, and foreclosures are more likely,” Chen said.

Between changes in income status and losses to home equity, borrowers are having a hard time keeping up. And when they go to refinance to a different payment, the negative equity in their homes prevents them from getting the help that they need. There is help for some, however. Barack Obama offered a foreclosure prevention plan back in February aimed at helping those who made good choices initially but find themselves in bad circumstances now. The plan allows for the refinancing of homes with little equity — and even a small amount of negative equity. However, if you don’t have a job, this plan will do little to help you.

It is clear that before the housing market can stabilize, and before foreclosures can truly reverse course, something will have to change in terms of employment. The labor market needs to stop shedding jobs so that people can continue to make their mortgage payments and stop foreclosure.