As joblessness has increased in the US, there continues to be a significant increase in mortgage delinquency for the last quarter. Initially sub-prime mortgage holders are blamed as their bad credit mortgage introductory rate period has come to an end, but now prime credit mortgage holders are facing difficulty as unemployment grows. According to a LA Times report more than 13% of US mortgage holders are either behind with their mortgage repayments or are facing foreclosure. As more and more people with clean credit records face falling behind with their repayments the demand from people looking for a bad credit mortgage soars.
The problem however is not the demand but supply of lending from the banks. As more and more financial institutions are becoming unsound, others are hoarding their bailout money for the possible worse times ahead. The so called bailout is bailing out the banks but not the businesses and borrowers who really need it. On a more positive note, there jobless figures showed a decrease of .1% from June to July, nothing to get excited about but at least it’s a move in the right direction. The new administration’s housing affordability program is helping but people are complaining that their applications, extensive and detail paperwork, are getting lost in the system. Loan modifications are are slow to materialize and in the event that they do so, people are still going to have to pay up later rather than sooner.
The State of California looks particularly bad as unemployment beats the national average, but due to it’s diverse economy and notorious up and down housing market some expect it to lead the recovery. Some agents are seeing people step back into the housing market as prices seem to have hit bottom, and there appears to be a pick up in San Francisco and Orange County.
The glut off people with good credit means that in order for the economy to make progress it will be necessary or people with bad credit to be given mortgages. It’s the only way to get cash circulating and breathe life into the comatose property market. The banks have no right to look down on people with bad credit records when they themselves have blemishes on their record. Lets hope they don’t take a ‘holier than thou’ approach – if they do they could extend this recession even further, thus cutting off their nose to spite their faces. Perhaps President Obama will look out for the people on the ground and push banks to release their hoard of cash sooner rather than later, so maybe an increase in spending by Christmas may set the US on the road to economic recovery. It seems too far to rech to expect to see home flippers, the heart of the last housing bubble, returning any time soon unless people with bad credit can get a mortgage to purchase their handiwork.
