Economic Depression

Frank Nothaft, the chief economist for the mortgage firm Freddie Mac has issued a warning stating that foreclosures have not peaked yet and that foreclosure rates for prime mortgages haven’t been this high since the Great Depression.

“I think mortgage delinquency rates haven’t peaked yet…We see them peaking at some point in the second half of 2010…You have to go back to the 1930s to see delinquency rates this high for standard mortgages,” Nothaft said.

Right now more than 4 million American mortgages are delinquent and facing a possible future foreclosure.  Just in the Dallas-Fort Worth area, about 5.7 percent of home loans were 90 days or more delinquent. And while that rate is much better than the nationwide 8 percent of delinquent mortgages but Texas is one of 11 states that account for 70 percent of all the foreclosures in the country. In 2009, foreclosure fillings jumped by 20 percent and unfortunately that foreclosure rate is expected in increase in 2010.

For homeowners not yet facing foreclosure, the massive numbers of foreclosures (including those that are backlogged) may negatively impact their home’s value or their ability to resell their home.  Many mortgage lenders are even holding foreclosures and refusing to place them on the market because they know that an influx of foreclosed properties for sale could further devastate the housing market.  For homeowners who are delinquent on their mortgage and hoping to sell their home, it may be wise to also consider your bankruptcy options.  Currently, the housing market is still severely depressed and any attempts to sell your home at a price that will cover your mortgage may fail.  That’s the reality. With bankruptcy you can voluntarily surrender your home and have the balance of your mortgage forgiven.  But outside of bankruptcy, selling your home for less than the cost of your mortgage could leave you with a bill and your mortgage servicer pursuing you in court for the balance.