By Cliff Montgomery – Mar. 5th, 2009
An industry survey has revealed that a whopping 48 percent of those with a sub-prime, adjustable-ratemortgage either are failing to keep up with their payments or are in foreclosure.
That makes 5.4 million Americans who were in serious danger of being homeless by the end of 2008–or saidanother way, a record 12 percent of Americans with a mortgage.
The Mortgage Bankers Association said on Thursday that the stunning number of failing mortgages is part ofan ever-increasing trend in the industry. The current record percentage is a mere rise from the 10 percent oftroubled loans from the July-September quarter, which itself was a rise from about 8 percent in 2007.
The sharpest rises in severely troubled loans–that is, mortgages 90 days past due–were in Louisiana, NewYork, Texas, Georgia and Mississippi. These rises are due to an increasingly bad recession, and particularly ofnation-wide, massive job losses.
The study further showed the rates for delinquent fixed-rate mortgage payments also rose in the last quarter of2008–another sign that the Great Recession is particularly rough on would-be homeowners.
But all is not lost. If President Barack Obama has his way, the government may soon create methods to bailout cash-strapped homeowners just as it bailed out mortgage bankers and the rest of Wall Street a few shortmonths ago.
Under Obama’s housing rescue plan, homeowners who can no longer afford their mortgages may be able toget those monthly payments decreased in bankruptcy court.
But there is far too much common sense and fair play in this measure for it to be loved by everyone.
“The bankruptcy measure has been the subject of an intense lobbying campaign by the financial servicesindustry, which has worked hard to kill it,” states The Associated Press (AP).
“It has exposed rifts among liberal Democrats who regard it as the only real way to help debt-strappedhomeowners avoid foreclosures,” AP continued, “and moderates who want to give voluntary efforts a chanceto work before resorting to the courts.”
But the AP analysis gets something wrong.
Those who oppose Obama’s measure are not “moderates”–they are rabid economic conservatives, clearlyspeaking out of ideology rather than out of any reasonable concern. The rabid conservatives may not yet admitit, but it was eight previous years of “voluntary efforts” in the financial industry which created the currenteconomic mess.
Expecting the disease to be the cure, rather than the cause, of an obvious sickness is ideology in everyone’sbook…that is, except for rabid economic conservatives, the incompetent financiers whose irrational ways led tothe current economic meltdown and the good publishers at AP.
A quick glance at the mortgage financiers’ position reveals its inherent foolishness. It insists that givingborrowers an “unfettered access to bankruptcy court mortgage modifications would impose steep andunpredictable costs on its companies,” according to AP.
Let’s examine this idea. The financial sector essentially is saying that if it is forced to accept new mortgageterms, whereby it will receive, say, 80% of what is still owed on troubled mortgages, its monetary loss will be toohigh to sustain.
So it would rather continue to foreclose on millions of American homes, create scores of failed mortgages andinstead receive 0% of what is still owed them. That’s not a good alternative.
True, the financiers would be able to reclaim their properties. But since foreclosures are already putting theAmerican economy into a massive tailspin, even more foreclosures will only drive an already collapsingeconomy ever further into the ground–and thus practically ensure that no one will buy the reclaimed properties,at least at anywhere near the properties’ real value.
This ultimately means that financiers would rather be stuck with worthless mortgages and properties whichthey cannot sell, as they struggle to survive in an ever-weakening economy of their own making.
Why? Because if they instead collect most of what is still owed on their troubled mortgage loans and save theU.S. economy by keeping families in homes, they’ve getting screwed.
And we wonder why we’re in this current mess.
