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Unemployment and Foreclosures by Feldman Law Center

Feldman Law Center – Toxic mortgages approved for borrowers that couldn’t afford them may have started the meltdown in mortgages but the current wave of foreclosures is being fueled by rampant unemployment across the country. Evidence of that is now being provided by the acceleration of defaults in mortgages granted to high credit score borrowers, commonly known as prime mortgages. The report of May’s 9.4% unemployment rate is more bad news for lenders and their investors as the biggest sector of the mortgage market is now showing a default rate greater than that of the sub-primes.
The rising unemployment rate, which has increased every month since the first quarter of 2007, is threatening to reverse any of the currently small gains being made in stabilizing the housing market. In many cases, unemployment can trump any mortgage relief effort short of foreclosure due to the fact that the best terms on a home loan modification, for example, are not going to work if the homeowner can’t write a monthly mortgage check to the lender.

Regardless of the type of mortgage, the current default ratios are stunning.  In total a record 12 percent of homeowners with a mortgage were behind on their payments in the first quarter, the Mortgage Bankers Association (MBA) said Thursday. The mortgages which started blowing up first, adjustable rate mortgages for sub-prime borrowers are still a significant factor in foreclosures. Today, almost half of all subprime ARMs are past due or in foreclosure. In states like New Jersey, Florida, and New York those rates exceed 55%.

The riskiest tranches of the adjustable subprimes began defaulting en masse in the fourth quarter of 2006, starting a domino effect of sub-prime lender closures leading to the freeze of the credit markets in the third quarter of 2007. The general opinion at the time was that the defaults would be contained to the sub-prime market with the possibility of some spillover to the most marginal of the Alt-A loans. Instead, foreclosures and unemployment began working as mutually re-enforcing factors and defaults climbed the ladder of credit scores, reaching and accelerating defaults in the prime mortgages in the second half of 2008. Six percent of the fixed rate primes are now past due, in default, or foreclosure, an increase of 100% over this time last year. The dynamic between unemployment, foreclosures and their effect on the economy has led to the longest recession since World War II.

Four states, California, Arizona, Nevada, and Florida represent almost half of new foreclosures and carry the highest number of delinquencies in fixed rate prime mortgages. It’s no coincidence that these states carry some of the highest unemployment numbers in the country as well.

The relationship between unemployment and foreclosures now has industry watchers wondering whether the Obama Administration is spending its energy, and funds, on the right target. Their reasoning is that if unemployment continues to grow at the current pace, the “Making Home Affordable” plan won’t matter because homeowners are not going to be able to afford even the best offers for a home loan modification if they’re not working. A better approach, they say, would be for the government to take a regulatory role on the mortgage market, develop an accreditation program for law firms doing home loan modifications, and put their main focus on boosting the economy.

About the Author

About Feldman Law Center: The Feldman Law Center is owned and operated by Steven C. Feldman, attorney at law. Mr. Feldman has been a member of the California State Bar since 1983 and is well versed in federal loan modification law.

Does anyone know of a loan company that will accept me because im not on the electoral register yet?

I Moved house 6 months ago & have always had a really good credit rating, however ive tried to apply for a £3000 loan and am being refused left, right & center! Ive just paid equifax to see my credit report, which is in good condition, other than im not on the electoral roll yet. I did apply to my local council when i moved in, have spoken to them today & they said it should be updated on my credit file, but isnt!! my previous credit history is good, ive got 5 credit accounts on there, inc my bank account, mobile phone contract, credit card and 2 catalogues, none of which have ever defaulted.
has anyone else had this problem? and does anyone know of a loan company that will look at my credit history & not the fact that it doesnt show me as being on the electoral roll yet?
Thank you

Being on the Register of Electors or Voters Roll is important to some lenders, and it can take 3 or 4 months from when you notify the council of your move to it appearing on the lenders systems.

If you have existing banking arrangements or credit cards and you have operated them within the terms and conditions, the bank/lenders would be a good place to start to try and get a loan.

You can try asking the council if they can write to you to confirm that your on the register, and then you can send that proof to a potential lender.

The problem is the credit crunch has made all lenders and bank ultra cautious and they’re just not accepting anyone at the moment that doesn’t have all the paperwork in order, and a good credit history and credit score. Being on the voters list is fundamental to getting a good credit score.

Don’t just apply online, if you have an account with a High Street bank, make an appointment and go and see them. Explain your situation, take the paperwork and see if they will help. Most banks do want the business, they just need convincing you’re a good risk!

There’s more information about improving your credit rating on my blog at

http://www.cardchoices.co.uk/credit-card-issues/top-5-tips-to-improve-your-credit-rating/

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