Unemployment and Prime Home Loans Add to Foreclosure Crisis – Charlotte NC Foreclosure Expert

Last year, risky sub-prime loans were fueling the housing crisis.  A recent quarterly survey of 44.6 million loans from the Mortgage Bankers Association (MBA) showed a rise in the proportion of prime home loans, mainly due to unemployment, is adding to the problem.

MBA’s 3rd quarter report stated that 14% of homeowners with a mortgage were behind on their payments or were already in foreclosure at the end of September 2009. FHA loans showed rising signs of trouble with more than 18% of FHA borrowers at least one payment behind or in foreclosure. Florida, Nevada, California and Arizona combined accounted for 43% of new foreclosures nationwide. Florida was hit the hardest with one out of every four mortgages either behind or in foreclosure.  Nevada came in second at 23%.

Unemployment’s Effect on Housing Market Recovery

Unemployment  is now the main reason why borrowers fall behind on their mortgage payments. It continues to undermine the housing market recovery and the longer the economy stays the way it is or gets worse, the less likely that unemployed homeowners will be able to hang on, especially in states with soaring unemployment like California and Florida. “It’s definitely a concern,” says Brian Bethune at IHS Global Insight. “(Unemployment) is a major driver of foreclosures and it will frustrate the housing recovery process.”

Foreclosures & Higher-end Home Values

Foreclosures are adversely affecting property values in more affluent neighborhoods nationwide. In the beginning, the higher-end (homes) were a bit isolated,” says Kevin Marshall, president of Clear Capital, a provider of real estate asset valuation. “But in the last several months, we’re seeing significant erosion in the higher-end homes. It’s reached into the prime loans.”

Wave of New Foreclosures 

Analysts predict that the increase in mortgage defaults will continue to affect the housing market as home prices fall and more foreclosures are put on the market. According to Jay Brinkmann, Chief Economist at MBA, this trend will continue well into next year as unemployment forces homeowners to walk away from their homes.

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