Brinkmann: Trailing Effect Could Have Effect on Future Foreclosures

Mortgage moratoriums, HAMP and other loan modification programs will continue to create a trailing effect on the overall number of foreclosures, MBA's chief economist Jay Brinkmann said during a press conference regarding the group's National Delinquency Survey. Now there is a longer time line before a loan actually goes into foreclosure, he said. For example, it will be six months before we see foreclosures essentially from delinquencies that occurred in the first part of 2009. For those loans which will go south in 2010, perhaps by the end of 2010 or in 2011 they will go into foreclosure, thus creating the trailing effect. This crisis is different, he said. Normally any kind of economic pick up would help avoid this trailing effect as improvements in home prices would offset some of the foreclosure rate. "The problem is that if you're in an area where prices dropped 30% and you're under water, just because prices come back up 2%-3% it does not help much." The economist noted however that "the trailing effect" is more of a symptom of the economic crisis than a driver of foreclosures. It will have a certain effect on prices in certain markets, but it will have more to do with what is happening in job creation, and jobs creation really won't be impacted by the foreclosure rate."