Very informative Article from The Wall Street Journal
What the Jobs Report Means for Housing
By Nick Timirias – WSJ
Friday’s jobs report is important to the housing market for two main reasons: Folks aren’t buying homes if they’re worried about losing their job. And, more importantly, more borrowers fall behind as they lose their jobs, especially when they owe more than their homes are worth. Indeed, the surest way to stem foreclosures at this point is to reverse job losses, something the administration likely knows all too well.
A report from Freddie Mac last week shows that job losses drove the vast majority of missed payments last year among prime borrowers, or those who have good credit. Freddie Mac said that 58% of its borrowers who went delinquent last year cited unemployment or reduced income for missing payments, while another 16% said payments had become excessive. Illness or death were responsible for another 11% of delinquencies, while marital problems resulted in 5% of delinquencies. Other top reasons: inability to sell a property (3%), job transfer (2%) and property defects (1%).
Freddie Mac reported that the number of its loans that are 90 days or more past due grew to 4.08% in February, up slightly from 4.03% in January. That’s the slowest rate of increase in more than a year, though seasonal factors (delinquencies typically do better in February than in January) and an uptick in recently modified loans that are re-performing could help explain the easing deterioration.
Fannie Mae said that 5.52% of its loans were seriously delinquent in January, up from 5.38% in December, the second smallest monthly jump in at last one year.
Early-stage mortgage delinquencies are expected to peak this year, and housing analysts have been looking to see when that might happen because it would represent a significant green shoot for the market. The Mortgage Bankers Association quarterly survey suggests that may have begun to happen during the fourth quarter, as the pace of job loss eased. But formally hitting a peak in early-stage delinquencies may be a Pyrrhic victory at this point because the pool of loans that are seriously delinquent continues to grow larger.
A more important metric to monitor are roll rates, which measure the share of loans that transition every month from 30 days delinquent to 60 days delinquent, or from 60 days to 90 days late. Those show no signs of improvement right now, according to data from LPS Applied Analytics.
Freddie Mac Chief Economist Frank Nothaft notes that there are some positives that could help ease new delinquencies: housing markets are showing signs of stabilization and government efforts to stimulate home sales with a tax credit and low mortgage rates have helped to soak up excess inventories.
But he cautions, “There are many reasons to be cautious about what could happen in coming months. Because of foreclosure moratoria, judicial backlogs and [modification] trial periods, many loans are languishing either in late-stage delinquency or in the foreclosure process and could add to [bank-owned] inventories in the coming year.”
What will this mean for Mortgage rates? Inquire within.
Market is closed today and I expect Monday to be one of the more volatile days our Mortgage Market has seen in a while
bc@smarterborrowing.com 617.771.5021
bc@smarterborrowing.com
617.771.5021
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