The housing market set an ignominious record in the third quarter. According to a study from the Mortgage Bankers Association, foreclosures on prime mortgages hit a new record high in the third quarter of 2010 as the U.S. economy continues to decelerate and housing prices continue to drop. The percentage of prime mortgages in foreclosure rose to 2.45 percent, up from 2.36 percent the prior quarter according to a report from the Mortgage Bankers Association.
Michael Fratantoni, VP of Research and Economics for the Mortgage Bankers Association commented:
“Most often, homeowners fall behind on their mortgages because their income has dropped due to unemployment or other causes. Although the employment report for October was relatively positive, the job market had improved only marginally through the third quarter, so while there was a small improvement in the delinquency rate, the level of that rate remains quite high. As we anticipate that the unemployment rate will be little changed over the next year, we also expect only modest improvements in the delinquency rate.”
Currently unemployment is at 9.6 percent, and when marginally attached workers and the underemployed are included, the unemployment rate jumps to 17 percent. In addition to this, home values are about down about 25 percent from their peak in late 2006. This has resulted in a situation where about 25 percent of borrowers are underwater on their mortgages, and another 25 percent are at risk of being underwater if prices decline further. It is no wonder that foreclosures are up even amongst those who took out prudent mortgages.
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