May 25, 2009

Job layoffs accelerate home foreclosures

The wave of U.S. housing foreclosures is being amplified as once-creditworthy homeowners lose their jobs and fall behind on mortgage payments, experts say.

The development is shifting the pattern of foreclosures from those who took advantage of risky subprime or other exotic mortgages to the far more common prime loans granted to applicants with acceptable financial histories, The New York Times reported Monday.

We're about to have a big problem, Morris Davis, a real estate expert at the University of Wisconsin, told the newspaper. Foreclosures were bad last year? It's going to get worse.

He pointed to predictions the U.S. unemployment rate will rise from its current 8.9 percent into the double digits, which will in turn worsen bank losses and put yet more pressure on the country's financial system and the U.S. economy as a whole.

We're right in the middle of this third wave, and it's intensifying, Mark Zandi, chief economist at Moody's, told the Times. 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.