There are a number of theories that claim that until housing prices recover bank earnings cannot get better. Financial firms hold too many home loans and mortgage-backed securities. Another set of theories says consumers will not start spending as long as home prices and the threat of foreclosures keep them frightened and cautious.
If these things are true, the economy has a long way to go to get better as U.S. foreclosure in October rose 25% from a year earlier.
The U.S. government and several big banks including JP Morgan (NYSE: JPM) have begun the process of extending payment plans for some homeowners. Many of the programs are even offering lower interest rates to help keep people in their homes. But these effort may only go a little way to help solve the problem.
As long as people believe they may lose their jobs, they will consider abandoning their homes if things get rough. Feeding children and keeping gas in the car to get to work may, in many cases, trump keeping up on a mortgage on a home that loses more of its value every day.
Some predictions put unemployment at 9% or 10% toward the end of 2010. As long as layoffs keep marching toward those numbers, foreclosure rates are not likely to drop.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
11-13-2008 @ 1:21PM
Anna said...
Banks are hurting but then again are refusing to work with the homeowners. Example I paid my property taxes two months late but managed to pay them in full and come to find out my mortagage company went ahead and sent a check to the tax county office for payment of my taxes with out verifying if it was paid. Then they sent me a letter advising my mortgage payments was increasing 700.00 due to tax payment and new escrows. I phoned my tax office and asked why would they accept duplicate payments and they advised they don't and returned their checks. Meanwhile the mortagage company is threating on higher mortagage payments without confirming status on property. This is why many homeowners are in the situation their in for the lenders are trying to make it impossible for them to make their monthly payments. Especially to homeowners with low mortagage balances.
11-13-2008 @ 3:42PM
Helen Bringas said...
Yesterday I read that forgiving credit card debt was NIXED. With all the help going to the big guys they cannot give the consumer a break. In fact I just received from Bank America that they a raising my variable rate formula by 5.00 percentage points to 28.49%. I can understand not wanting to forgive credit card debt, but at least they can help the little guy by lowering the interest rate to help their customers. This increase will push more people off the ledge who are just making it. When will people like me get a helping hand. I pay my bills on time and luckily did not refinance my home. It appears that this government, agencies and banking system wants to make sure that every single person in this country is broken. There appears to be only concern about the top, but the top cannot survive without a good foundation.