‘Serious’ Trouble for Mortgage Delinquencies

The number of seriously delinquent mortgages in the U.S. rose by 20 percent in the third quarter of 2009 from the previous quarter, a seriously troubling figure for the housing market.

According to the Office of Comptroller of the Currency and the Office of Thrift Supervision, which surveyed about two-thirds of the nation’s mortgages, 3.6 percent of all prime home loans, those with the best credit, were classified as seriously delinquent.  That means those loans are 60 days or more past due, and while 3.6 percent may not seem like a big deal, the fact that it represents a 20 percent jump over a period of three months is very significant. It is a reflection of the far-reaching effects of the country’s 10 percent unemployment rate. Even a portion of the timeliest borrowers are unable to keep up with their loans when they lose their jobs.

And what about the government program to combat these rising delinquencies that often lead to foreclosures? Obama’s Home Affordable Modification Program that asks mortgage servicers to work with borrowers to lower their interest rates or monthly payments is not having much success. While 274,000 loans were modified on a trial basis in the third quarter, only 1 percent of those have been converted to permanent modifications, meaning 99 percent of them are likely to fall behind or into foreclosure again in the near future.

Lenders say the problem is that many of these borrowers seem like they have the needed qualifications at the beginning, but then don’t actually meet the program requirements.

Still, whatever the reason, the facts are that delinquent loans are continuing to pile up and a whole new flood of foreclosures definitely seems likely for 2010.

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