Prime Borrowers Hit By Foreclosures
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.
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