We are a good two years into this housing market mess and that headline isn’t what you want to see. When things originally went awry as this article from philly.com states, it was more a product of the subprime market exploding even while the economy was growing and unemployment was at record lows.
Now? Unemployment is showing its ugly face and it could have a huge say in the housing market’s ability to turn around.
The article also mentions that traditionally, foreclosure comes at the end of a downturn as a result of rising unemployment levels. In this case, housing problems were the cause, not the result and while unemployment has been an issue for foreclosure levels, the full effects of it are only starting to be felt.
People that have been paying their mortgage on time for years are getting caught up in the mess as they are having to sustain their lifestyles despite prolonged periods of unemployment.
More Adjusting Loans on the Way
Unemployment isn’t the only thing threatening to bring more foreclosures. According to an article in the Bradenton Herald, there are an estimated 2.8 million option adjustable-rate mortgages scheduled to reset in coming years with the peak occurring in mid-2011.
This is going to cause the same problems we started with. Payments balloon and homeowners can no longer afford to stay current on their loan. Put that with the unemployment issues and its downright scary.
The impending adjustment of dangerous option ARMs isn’t new to the analysts watching this, but there isn’t really anything in place to stop it other than loan modification options for homeowners. There will be increased pressure on the servicing companies and government alike to improve the opportunity for homeowners obtain a workout agreement. The status quo will not hold.
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