Mounting job losses fuel foreclosures, lower mortgage rates
Bad loans were originally the main culprit driving homeowners into foreclosure, but now it’s unemployment that’s fueling the mortgage meltdown. For years, bad loans and their aftershocks have been sending homeowners into foreclosure. Now it’s lost jobs that are putting troubled borrowers over the edge.
As the economy falls into a recession, unemployment is the major factor driving a much larger proportion of foreclosures now than in the earlier stages of the mortgage meltdown. In June, 45.5 percent of all delinquencies reported by Freddie Mac were due to unemployment or the loss of income, according to the company. That’s an increase from 36.3 percent in 2006.
Nearly one million Americans have lost their jobs in 2008. The Bureau of Labor Statistics reported in early October that 159,000 private sector jobs were lost in September, and last week, economists expect the BLS to report that 200,000 jobs were lost in October.
The weaker jobs market also contributed to lower mortgage rates, according to Freddie Mac, which recently released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 6.20 percent with an average 0.7 point for the week ending November 6, 2008, down from last week when it averaged 6.46 percent. Last year at this time, the 30-year FRM averaged 6.24 percent.