Obama’s Economic Recovery Program Is Failing – New Wave of Mortgage Foreclosures, Unemployment Continues To Rise, Automakers Prepare to Shut Plants – Layoff 10’s Of Thousands

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories.

With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. [Remember, the Obama Administration predicted a maximum unemployment rate of 8.9 in its projections of economic recovery- McAuley’s World]

That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.

“We’re right in the middle of this third wave, and it’s intensifying,” said Mark Zandi, chief economist at Moody’s Economy.com. “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. [Now that we have wasted 100’s of Billions in tax payer dollars helping the reckless and those not qualified to be homeowners, where is the assistance for those who played by the rules? Mc Auley’s World].

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage servicing companies that reduce payments for troubled homeowners. [The Obama Administration claimed the program would help 4 million home owners]. But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at “more than 10,000 but fewer than 55,000.” [Why can’t the Government be more exact than this – a 45,000 mortgage gap between 10,000 and 55,000. Where is the $75 Billion in Taxpayer money going? If the “true number” of modified mortagges is 10,000,  the Obama program cost taxpayers $7.5 million per mortgage. Who is kidding who? Someone is robbing the US Taxpayer blind] 

In the first two months of the year alone, another 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.

“I don’t think there’s any chance of government measures making more than a small dent,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

Last year, foreclosures expanded sharply as the economy shed an average of 256,000 jobs each month. Since then, the job market has deteriorated further, with an average of 665,000 jobs vanishing each month.

http://www.nytimes.com/2009/05/25/business/economy/25foreclose.html?pagewanted=1&sq=May%2025,%202009%20Mortgage%20foreclosures%20&st=cse&scp=1

GM announces an additional 47,000 job cuts amid palns to shut 5 US auto plants.   (February 2009). http://www.wilx.com/home/headlines/39750882.html

U.S. to steer GM toward bankruptcy … The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and re-emerge as a global competitor, sources familiar with the discussions told the Washington Post. http://scoop.chrysler.com/2009/05/22/us-to-steer-gm-toward-bankruptcy/

Chrysler confirms 6 additional plant closings – May 2009. http://scoop.chrysler.com/2009/05/06/chrysler-issues-plant-closing-statement/ 

GM plans to shut 14 more auto plants, reduce employees by 20,000.  (April 2009) Gm announces planned cuts did not go far enopugh, additional cuts planned. http://money.cnn.com/2009/04/17/news/companies/gm_jobs/?postversion=2009041712

From the WSJ: Mortgage Defaults, Delinquencies Rise

… A spokesman for the FHA said 7.5% of FHA loans were “seriously delinquent” at the end of February, up from 6.2% a year earlier. Seriously delinquent includes loans that are 90 days or more overdue, in the foreclosure process or in bankruptcy.

The FHA’s share of the U.S. mortgage market soared to nearly a third of loans originated in last year’s fourth quarter from about 2% in 2006 as a whole, according to Inside Mortgage Finance, a trade publication. That is increasing the risk to taxpayers if the FHA’s reserves prove inadequate to cover default losses. http://www.calculatedriskblog.com/2009/03/fha-mortgage-defaults-increase.html

 

 

One Response

  1. So what else is new… People bought the package not the content. There is an old saying “you get what you pay for and you pay for what you get” The time to pay up is comming quicker than expected.

    Here is a thought ” trust in the Lord with all your heart and do not lean on your own understanding. In all your ways acknowledge Him and He will direct your path” prov. 3:5-6

    Man does not have the answers ….

    Blessings,
    AV1

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