Recession is now the Primary Cause for Foreclosures
It is not so much sub-prime mortgages but recession that is at the root cause of rising foreclosures. In 2008 it was the toxic loans that had triggered the foreclosure wave but in the current year it is the bad days that are responsible for throwing out people from their houses.
Compared to the previous year there has been a sharp increase in foreclosure posting in Lackawanna County and Luzerne County. The increase has been by 4.2% and 2.4% respectively. The figures indicate that recession with its attendant evils of unemployment and falling wages are responsible for the crisis in northeastern Pennsylvania.
The increase in foreclosures today is attributable to the general economic gloom said Professor Satyajit Ghosh of University of Scranton. His subject of study is economics and finance. The local lenders had not indulged in toxic and risky loans but nevertheless this has not helped to keep it immune from the national disaster. Dr. Ghosh opined, “People are stretched to the limit. Maybe they have a conventional loan from a lender acting in good faith, but now they find themselves in a bad situation, where they may have lost their job, or the household lost an income, or they took another job at less pay.”
According to First American CoreLogic foreclosure postings dropped from April 2008 to May 2009 in Scranton-Wilkes-Barre-Hazelton metro region that comprises of the counties of Luzerne, Lackawanna and also Wyoming. But despite this the speed of foreclosure activity has been steadily increasing during the recent months.
CoreLogic noted that in April all the defaulting mortgage loans calculating to nearly 1.7% were in trouble. This was a modest improvement on the national figure of 1.8%. In April 2008 nearly 1.5% of all mortgage loan holders across the country were being threatened by some form of foreclosure.
Defaults have been increasing in the region. CoreLogic noted that nearly 4.4% of all the home loans in the region were lagging behind by at least 90 days. This as an increase of 3.6% in comparison to the previous year. Delinquencies are the first signs of impending foreclosures. Once borrowers start to lag behind it is difficult to catch up or manage a way out of the mess.
Dr. Ghosh commented, “We have been at a lower foreclosure level for some time because our banks and our homeowners didn’t go for exotic loans. These new foreclosures aren’t because of some irresponsible loans. It’s the recession.”
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