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Record Numbers of Prime Fixed Rate Mortgages Head into Foreclosure

Published by Rob Thomas | October 11th 2009 | Views:

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We've all heard about the disastrous state of sub-prime mortgages, and we're starting to hear about the coming disaster in alt-a mortgages, but there is also a real story to be told regarding prime mortgages.

Prime mortgages represent loans taken out by the best borrowers in our financial system. These are the families with great credit ratings, long track records of good decision-making, and stable incomes from steady jobs.

We've also been told that mortgage failures are the fault of adjustable rate mortgages sold to unwitting borrowers by unscrupulous lenders.

The truth of the matter, however, is far uglier. Prime fixed-rate mortgages now account for one in three foreclosure starts. The best borrowers in our financial system are defaulting on the best loans in our financial system.

Late payments on U.S. mortgages hit a record in the second quarter, and are expected to go much higher as unemployment rises. 9.24% of all home mortgages are now delinquent. Just one year ago, that rate was 6.41%.

Foreclosures not only take people out of their homes, they also lower real estate property values for the people who are able to make their mortgage payments. These lowered property values mean that many Americans now owe more on their mortgages than their homes are worth in the current market. Many home owners in the hardest hit regions will actually save money by walking out of their homes and letting the lenders repossess them.

In the midst of all of this, the federal government is planning new tax and spend strategies which will damage America's ability to compete globally. This will further increase unemployment, which will in turn cause home foreclosures to surpass their current record levels.
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