MBA Addresses Foreclosure Causes
On a national level, delinquency and foreclosure rates are currently low, according to the Mortgage Bankers Association. However, in the Midwest, and specifically Ohio, these rates have been elevated due to a weakened regional economy and the resulting job losses.
During a U.S. House of Representatives Financial Services Committee field hearing recently, Michael Fratantoni, senior director for Single-Family Research and Economics at the MBA delivered testimony on the causes and trends in mortgage delinquencies and foreclosures.
"Though currently low, delinquency and foreclosure rates varied across the country in the first quarter of 2006," said Mr. Fratantoni. "More specifically, the Midwest has maintained the highest rates of foreclosures, due to the continuing decline of jobs and relatively weak housing markets as well as the high level of homeownership in the Midwest."
The same economic factors that have caused mortgage delinquencies and foreclosures throughout history continue today, such as job loss, illness, divorce and other unexpected challenges, he testified. In Ohio, job loss, specifically in manufacturing, has become a major contributing factor to the rate of mortgage delinquencies and foreclosures. Due to ongoing productivity growth and increasingly strong global competition, it is likely that manufacturing employment will remain soft in the coming years.
In Illinois, Indiana, Michigan and Wisconsin, delinquency levels have remained at historically high levels. Homeownership rates are considerably higher than the national average. In general, new homebuyers have not had time to accumulate equity in their homes and tend to carry higher levels of non-mortgage debt.
New homeowners typically lack the cushion to continue to pay mortgage payments during a financial crisis or economic downturn and are more susceptible to default. Every party to a foreclosure loses - the borrower, the community, the investor and the mortgage lender, he said. Profitability for the mortgage industry rests in keeping a loan current.
MBA data show lenders helped 3 out of 4 borrowers avoid a forced foreclosure sale. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com/