New wave of delinquencies on the way
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Speaker Pelosi brought up the TARP this afternoon when she was talking about money for Detroit.
That’s how the White House, this one or the next one, might find its way clear to bailout carmakers if loans can’t pass Congress.
One thing the TARP hasn’t been used for yet is mortgage relief.
We learned today the worst of the housing crisis may not be behind us.
One of the big consumer credit companies came out with a disheartening bit of data that the number of delinquent mortgages is expected to nearly double by the end of next year. Adjustable rate mortgages in particular.
That means homeowners who aren’t having any trouble paying their bills right now could get squeezed as their mortgages reset.
Marketplace’s Jeff Tyler has more.
Historically, the number of people 60 days late with mortgage payments has hovered around 2 percent.
Ezra Becker: We expect it to more than triple from historic norms.
That’s Ezra Becker with the credit bureau, TransUnion, which did the analysis.
He expects mortgage delinquencies will be near 8 percent by the end of next year.
Becker: Not only is it rising. But it’s rising at an increasing rate.
So what can be done?
Barry Zigas with the Consumer Federation of America points to work being done by the FDIC.
Barry Zigas: It is possible to help home-owners avoid foreclosure and default by intervening quickly and energetically to adjust the mortgage payments to a level that they can afford. And we just haven’t seen enough of that across the government. And that is one of the reasons we are going to see more delinquencies than we might otherwise have.
Part of the problem is the bonds that are tied to mortgage debt.
Zigas says those bonds have been sliced up and sold to investors all over the world.
Zigas: The government should be focusing more attention on how to move these bonds into an ownership structure where they can be dealt with, and they’ve been very slow to do so.
If foreclosures are allowed to increase, more bonds will go bad.
Helping individual home-owners gets messy.
Mark Zandi, chief economist with Moody’s Economy.com,
points out the challenge of deciding who gets help.
Mark Zandi: If you start helping home-owners, then other home-owners who are just struggling to get by will raise their hand and say, ‘Well, why not help me? I deserve help as well.’
If you need help, talk to your lender.
Banks are much more likely to work out some deal if you contact them before you stop sending them checks.
I’m Jeff Tyler for Marketplace.
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