What Uncle Sam Can Learn from Mortgage Borrowers

Before Barack Obama was elected president residential mortgage debt in the U.S. was actually larger than outstanding Treasury debt. At yearend 2009 home mortgage debt peaked at $10.1 trillion. Today that number is a $1 trillion lower – according to figures compiled by National Mortgage News and the Quarterly Data Report. As for Treasury debt, that's a bit higher at $15 trillion. I won't waste your time with the reasons behind our nation's ballooning debt but suffice to say the housing market's crackup – which started in earnest during the Bush (II) Administration – is at the center of the core. But the lesson learned from mortgagors is important: housing debt can be paid down and eliminated which is good for personal balance sheets. It may not be good for residential servicers but I would guess that no one in the industry is really fretting about the mortgage debt decline. In time, that number will once again increase. It's just a matter of when. But I should point out one fact about the declining servicing/MSR figure: some of it is tied to cash-in refinancings, but most of it came about because existing loans were wiped out by foreclosure. In other words, yes, consumers are reducing their mortgage debts but a majority can be traced to delinquency. But wait, there is good news here somewhere: I would gladly wager that Americans who've refinanced the past two years have likely lowered their monthly payments by at least $300 on average. Can Uncle Sam brag about the equivalent? I don't think so…