Today we learn from the Mortgage Bankers Association (MBA) that at least one out of every 10 homeowners is behind on their mortgage or already facing foreclosure, a fact that underscores what we already know is the gloomiest housing picture in the United States in decades, possibly ever. The MBA's newest numbers for the three months ending September 30 also underscore what we and others, including many economists with expertise in housing issues, have been saying for over a year: Avoiding foreclosures that don't need to happen is our country's best hope for economic recovery.
The reason Treasury Secretary Paulson has had to announce a new plan to prop up the economy every few weeks for over a year is that none of the plans launched so far--however well-intentioned and necessary--has addressed the runaway foreclosures that are at the root cause of today's crisis, driving losses at financial institutions and driving down property values nationwide.
"This report documents the depth and enormity of the housing crisis," said CRL President Michael Calhoun. "The present and new administrations must implement new, systematic programs that will provide relief so as many families as possible can stay in their homes."
The only way to dampen foreclosures meaningfully is for Congress and regulators to give up the piecemeal approach and adopt a mortgage modification plan that will allow for a large-scale rescue of homeowners quickly. To accomplish this, Treasury should immediately implement the FDIC's proposal for the government to guarantee modified home loans as a way to induce loan servicers and investors to agree to such changes. In addition, Congress must act quickly to lift the ban on judicial modifications.
Consider these highlights from the number the MBA released today:
- 1 in 10 home loans is in delinquency, 1 in 20 is seriously delinquent, and 1 in 33 is in foreclosure.
- At the end of September, the nation experienced foreclosures at an annual rate of 2.4 million. We estimate that those foreclosures alone will cause an additional 41 million American families who happen to live near these properties to see their own home values plummet by an additional $352 billion.
- Deteriorating housing markets in California and Florida are driving the dismal outlook nationally, though many other states continue to lead the nation in suffering, including Nevada, Arizona, Michigan, Rhode Island, Illinois, Indiana, and Ohio.
To read the MBA release.
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