One in eight Americans are now delinquent on their mortgages or in foreclosure, according to a new report from the Mortgage Bankers Association. In Florida, an incredible 12 percent of mortgages were at some point in the foreclosure process in the second quarter of 2009. Most worrisome: Problems with prime fixed-rate loans are on the rise, largely due to rising unemployment.
The share of loans with one or more payments overdue rose to a seasonally adjusted 9.24 percent of all mortgages, an all-time high, from 9.12 percent in the first quarter, the Mortgage Bankers Association said in a report today. The inventory of homes in foreclosure increased to 4.3 percent, the most in three decades of data, and loans overdue by at least 90 days, the point at which foreclosure proceedings typically begin, rose to 7.97 percent, the highest on record.
There is a moral to this story. From the moment politicians began proposing measures to ameliorate the impact of the housing bust on the U.S. economy and individual Americans, critics responded with a strong dose of moral outrage. Why should speculators, flippers, and deadbeat "losers" get help from the government? They screwed up, and they should pay the price. Let them drown in their own option-ARM bile!
The sensible response to this blast of anger was to observe that society as a whole would pay a cost for mistakes made by the imprudent, and like it or not, for the benefit of the general public, we need to do what we can to cushion the impact inflicted on all of us by the irresponsible. (The same argument, by the way, can be made about bailing out the financial sector.)
When we see borrowers begin to fall behind on prime fixed-rate 30-year-mortgages because of job loss or other recession-fallout, it's not so easy to self-satisfyingly blame them for their own predicament. They are collateral damage, and as they lose their homes, further depressing home prices and crimping economic growth, the gyre continues to widen. If there's any lesson from this mess, it's that more aggressive government help is necessary when the economy gets hit by a falling anvil.