A recent survey indicated that delinquencies are down just when they should have gone up, even during prosperous times. Is this the beginning of the long-awaited recovery?
A mortgage is a loan made to purchase a house. A house is the single most expensive purchase most individuals will ever make in their entire lives, and often costs well over ten times one's annual income. Thus, a loan is necessary, and mortgages are usually paid back over a period of thirty years.
However, if payments are not met, accounts are considered delinquent. Delinquency is a big problem for the industry, and no more so than right now, in the midst of an extremely severe economic crisis. Indeed, it was mortgage delinquencies which caused the current malaise! As payments were missed on properties that lost value, homeowners wound up owing more than their houses were worth, an untenable situation whose vicious cycle seems to know no end.
Thus it was that the slight decline in the rate of delinquency late last year caught many industry observers by surprise. A recent industry survey found that at a time when delinquency has traditionally risen, even in good years, due to increased expenses associated with winter heating and holiday shopping, the rate at which mortgage payments have fallen behind has slowed down a little during the fourth quarter of 2009. Optimists hoped that this could be a sign that the foreclosure crisis may be finally attempting to timidly come around to something of an end.
Well, don't you believe it. Consider that:
~ Economists believe that foreclosures could reach their highest levels by the end of this year, especially if unemployment rates peak in the middle of the year.
~ Worse yet, foreclosure rates will probably stay at those elevated levels as borrowers continue to struggle in regions where drastic price declines have made many homes worth less than the money owed on them.
~ The big problem is that way too many have missed at least three payments, and these are precisely those who are least amendable to the variety of mortgage relief programs available. These are the very people who will be going into foreclosure. Indeed, many borrowers have problematic situations that do not easily lend themselves to tidy remedies.
Of course, there are also those economists and other such experts who believe that the situation is still extremely grave, as there are still record numbers of homeowners in financial distress. In recognition, the government has again stepped in on behalf of those with little or no equity in their homes, extending a refinancing program that has posted little progress in over a year. Many experts express skepticism. After all, it's been well over two years into the economic debacle and still no one has any evidence at all as of yet that the end is in sight, or even could be right now.
Numbers improve, to be sure, and trendlines offer some cause for hope. And surely the proverbial sun will rise again - but in the here and now, there is a lot more "night" to get through before that "morning."