More Than 2 Million U.S. Homes Went into Foreclosure in 2008; 11% of Mortgages 'in Trouble’
February 16, 2009 - 6:09 PMData from the Mortgage Bankers Association shows that 11 percent of the nation's home mortgages were delinquent by at least one payment, were already in foreclosure or entered into foreclosure during the third quarter of 2008 .
The MBA’s National Delinquency Survey, which tracks mortgages nationwide, found that 7 percent of mortgages were at least one month behind, and approximately 3 percent of the nation’s mortgages are currently in foreclosure.
Foreclosure “starts,” or mortgages that had entered into foreclosure process, stood at 1 percent for the third quarter.
According to the Federal Reserve’s “Flow of Funds” report, the total value of all home mortgages in the U.S. was $11.2 trillion through the third quarter of 2008, which ended in September.
Those figures, combined with the recessionary economy, paint a bleak picture for the nation’s homeowners; as falling home prices, employment uncertainty, and tight credit markets constrict their range of options.
Normally, most delinquencies are resolved by refinancing-lowering interest rates and therefore monthly payments--or by selling the home. However, a dismal housing market and a tightening credit market have caused these options to all but evaporate.
The poor housing market makes selling a home untenable for some mortgage holders, because they may not be able to sell for enough to repay their outstanding balance.
Treasury Secretary Timothy Geithner announced on Feb. 10 that the government would supply $50 billion to prevent avoidable foreclosures, with details to be announced Wednesday.
Geithner said the government would focus on reducing monthly mortgage payments for some borrowers, but offered no specifics.
Obama senior adviser David Axelrod, speaking on “Fox News Sunday,” said the plan the president would announce is aimed at homeowners who are "right on the edge" of foreclosure, but also did not give details.
There are several plans already underway, which may be expanded.
The largest plan, offered by the Federal Housing Administration (FHA) -- known as “Hope for Homeowners”-- allows lenders to refinance borrowers into an FHA-insured fixed rate mortgage, if the lender writes down the existing mortgage balance and pays an up-front insurance premium. Borrowers participating in the plan must share any future appreciation of the home’s value with the federal government.
This plan has faced hurdles as banks and mortgage services have balked at writing down a mortgage’s principal, which would reduce the value of the mortgage itself.
Another plan, run by the Federal Deposit Insurance Corporation (FDIC) and used during that agency’s conservatorship of IndyMac last year, lets individual borrowers and lenders re-work a mortgage themselves, but commits the government to share in 50 percent of the losses, should the borrower re-default.
Any plan would face a daunting task, given the massive numbers of mortgages in foreclosure and the staggering value of the mortgage market itself.
According to the MBA’s report, its delinquency and foreclosure numbers are likely smaller than market reality because some banks, notably JP Morgan Chase and Citigroup, have halted all foreclosures; while other banks stop keeping track of how far behind borrowers are while they work with those borrowers on modifying their mortgages.
In fact, according to MBA, every state except Alaska had an increase in mortgages that were more than 90 days past due but were not in foreclosure. Normally, a mortgage that is more than 90 days past due is foreclosed on.
MBA estimated that a total of 2.2 million homes went into foreclosure in 2008, a number the group expects will grow in 2009 as unemployment continues to rise and the housing market continues to fall.