America’s one in ten still suffering in loan crisis

Published 20th May 2010

More than one homeowner in ten in the United States missed at least one mortgage payment in the first quarter of the year, setting a record that suggests America’s housing and repossession crisis is far from over.

The figures from the US Mortgage Bankers Association also show that 4.6 per cent of homeowners had their homes repossessed in the first quarter — another record.

Jay Brinkmann, the association’s chief economist, said that because the economy had begun to generate jobs and the rate of job losses had started to decline, America’s repossession crisis appeared to be stabilising and was not getting noticeably worse. The proportion of loans behind by only one payment had started to decline, he noted, as new claims for unemployment began to fall in March 2009.

Nevertheless, he said, “a bad situation that’s not getting worse is still bad”.

Despite strenuous government efforts to persuade lenders to modify loan terms to help people who are struggling to pay mortgages to stay in their homes, foreclosures have risen. Moreover, the figures indicate that the profile of Americans who are losing their homes is changing: homeowners who took out conventional, fixed-rate loans are now the fastest-growing group among the foreclosure victims, making up nearly 37 per cent of new repossessions in the first quarter of the year, up from 29 per cent a year earlier.

In contrast, the risky sub-prime loans that kicked off the credit crisis in 2007 made up only 14 per cent of new foreclosures in the January-March period, down from 27 per cent a year earlier.

The figures also show that unemployment in the US, which hovers near double-digits, is forcing more homeowners to default across the country, not only in those states hurt most in the initial tidal wave of repossessions spawned by high-risk loans.

The Mortgage Bankers Association said that the adjusted data needed to be treated with caution because of the difficulty in gauging a fundamental improvement, rather than seasonal adjustments. Mortgage delinquency rates typically peak in the fourth quarter — when family spending is pushed up by winter weather and the Christmas season — and fall in the first quarter

Source: ' Times '

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