Our current foreclosure crisis over the last three years was mainly driven by subprime adjustable rate mortgages with skyrocketing rate hikes at adjustment. As a driver of foreclosures, this really wasn’t such a a bad one since, at least, there was an end in sight. Once the subprime borrowers were cleaned out, the foreclosure crisis would end.
NJ.com puts it this way,
“The only bright spot in the report is the devastation wrought by subprime ARMs appears to be waning. Their 30-day delinquency rate continues to fall and is at the lowest point since the first quarter of 2007. “
So we have finally turned the corner on foreclosures, right?
Now we have a new driver of foreclosures in the climbing unemployment rate. Even though today’s unemployment number came out “as expected”, it was still an awfully high number – 639,000 new unemployment claims. With over 8% of the workforce not working, it’s only a matter of time before these folks stop paying their mortgage.
Ground zero for the current foreclosure crisis are States like Florida, California, Nevada, and Arizona. These were areas that relied heavily on subprime mortgages. So it makes perfect sense they are still showing the most foreclosure filings.
But now with unemployment as the main driver, States like Louisiana, Michigan, New York, and Texas are seeing foreclosure filings jump. It’s easy to see Louisiana, and Texas are getting employment hit by dropping oil prices. Michigan employment is dropping do to the auto industry tanking. And New York is laying off investment bankers and other financial industry personnel in droves.
When fixed rate loans are going into default, you know the cause can’t be exploding rates. The cause must be something outside the mortgage terms. In this case, I think we can blame the job market.
Let me quote NJ.com again,
“We’re seeing increases in fixed-rate categories and that’s where the problems are coming from,” said Jay Brinkmann, the group’s chief economist. “The foreclosure picture is more clearly driven by the jobs market.”
So the end we thought was coming will get forestalled by a bad job’s market.
We just can’t catch a break.
I guess we should all get ready for the Obama “Job Market Recovery Act of 2009”. I am sure that program will get funded with $800 Billion of tax payer dollars…or just put every unemployed person on the government payroll.
But you can count me out. I’ll just keep my current job writing for you guys.
See ya next week!