More Information Concerning Mortgage Delinquencies

News that mortgage delinquencies are at a record high will not come as good news to economists

, since it is a sign that does not usually augur well. It's even surprising news as it was expected that the market was showing signs of recovery. The number of delinquencies for the first quarter of 2010 is 10 %, which is up from 9.1% during the same period last year and 9.5% during the last quarter of 2009.

One more probably worse statistic is the number of home owners that have fallen behind on their mortgages to a serious degree. Those who had fallen back on their repayments, in December of 2009, stood at 3.6%, while in February 2010 they stood at 8%. Obviously, those who are falling behind on their mortgage repayments are in danger of foreclosure which is a serious risk to an already fragile housing market.

There is some good news however since despite delinquencies being at an all time high, the rate at which individuals are falling behind is slowing. Although still rising, if the trend continues to reverse then there is a possibility that the delinquency rate could begin to decrease. Another factor to take into consideration is the seasonal factor, due to holiday payments and heating bills the last quarter of the year might lead to individuals putting off their loan repayments and that could partially explain what we are observing.

It is possible, though, that these statistics are somewhat inflated and the percentages quoted do not reflect the real condition of the market. The reason for this is that lenders are at present holding up on foreclosure to seek alternate options whereas in the past, foreclosure on several properties would have been completed resulting in these properties being removed from the system.

In the following quarter we may well see the people who are delinquent on their loans being switched to the Home Affordable Modification Program, or agreeing to a short sale. Either would remove these properties from the system which means that there are fewer delinquencies, while not contributing to the foreclosure statistics at the same time. If this is the case then it might offer a much needed boost to a housing market that is flat after the first time buyers tax credit deadline expiry.

Since foreclosures create such a risk to the housing market, which in turn has a very strong impact on the economy, the government will do all that it can to prevent the property market from falling again. One fascinating statistic is that 31% of foreclosures are strategic. Essentially, a strategic foreclosure may make home owners feel as if its in their best interests to walk away from the house and their mortgage. Individuals typically do this when they feel as though the outstanding mortgage amount is higher than the value of their home, leaving them in negative equity.

Many of those people are not aware that lenders look down upon strategic foreclosures more than any other type, meaning that they might find it extremely difficult or even impossible to buy one more home in the future. If these individuals could be educated on this and on the options that are available to them if they're struggling, then perhaps the housing market will not be as fragile as it appears.

by: Cory Boatright

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