Foreclosure Now Attacking Prime Mortgage Borrowers
Foreclosures and delinquencies are now attacking prime mortgage borrowers. Across the nation, 3.07% of all the prime mortgages had entered the dreaded foreclosure zone or were late by 60 days during the second quarter of 2008. The previous record of 1.97% of 1985 has been broken by leaps and bounds according to Mortgage Bankers Association.
Judy Jones lost equity on her house in Murrieta. But life was not too bumpy since she had a secure government job. The mortgage contract of her house was supposed to last for 30 years and the interest was 5.875%. It didn’t that seem she would be affected like her other neighbors in the Inland Empire. But fate decreed otherwise. Corona City, her employer, decided to get rid of 112 company positions, including that of the code-enforcer, which Judy worked as. At 61, Jones joined the ranks of borrowers, once considered solid, that are facing foreclosure.
Jones was disconsolate and said, “Every week at church, somebody else is out of work. I’ve been a homeowner a long time – the last ten years as a single mother – and I’ve never missed a payment. Now look at me. And it could be you – any middle-class person who goes to work today could be walking out the door of a foreclosed house in a couple of months.”
However, Jones’ fear is not without cause. Although sub-prime mortgages have been the prime cause of foreclosures, today prime borrowers are tumbling into the soup. These people had good credit records and had properly documented their records when they opted for conventional, straightforward mortgages.
In California, the unemployment rate is at 8%, its highest rate ever, while the average price of a property has gone down by a whopping 40%. It continues to fall; 4.15% of prime loans are seriously at risk from foreclosures. This has far exceeded the previous highest mark of 2.6% reached during the dreary 80’s and 90’s. Since the second quarter, the rush of prime mortgages into the risky foreclosure zone has worsened.
The situation is likely to worsen with more foreclosed and bank repossessed houses entering the general real estate market. It will push the country into a deeper recession and financial crisis. Stephen C. Levy of Center for the Continuing Study of the California Economy said, “We should be really worried.” Previously, one could sell a house and get out of a sticky financial situation. But now that option is no longer there.
