U.S. Mortgage Market Still In Troubled Waters

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There’s no question that many experts believe that the heart of the recession is rooted in the problems of the nation’s mortgage market. The stabilization of housing has been seen as a pathway to recovery, and while there have been a few glimmering signs of hope, there’s still a whole lot of question marks as to whether we’re approaching a full on recovery. According to a recent report in fact, the mortgage problems of the average homeowner aren’t getting better, they’re getting worse.

The report covered roughly 37.4 million home loans (two thirds of all outstanding mortgages in the country) and examined the performance for the fourth quarter of 2008. Of those covered, we’re looking at 10 percent of them being “nonperforming” which means they’re behind on their payments. Even those consumers outside the traditional problem areas such as those with good credit and who made a substantial down payment on their home, are starting to become delinquent. That’s certainly troubling, but is certainly a symptom of the worsening job market. John Dugan, comptroller of the currency, went on to point out that “Historically speaking, that’s the highest we’ve ever seen prime mortgages (in default).” Sobering news for those hoping for a swift turn around for the housing market.

With that said, efforts are already underway to soften the continuing freefall of housing prices. Loan modification efforts are having at least some positive effect, according to new data from the Office of Comptroller of the Currency and the Office of Thrift Supervision (I want to work at that office!). According to the data cutting down monthly mortgage payments by more than 10% significantly brings down the chance that the homeowner will fall behind again. I personally don’t find that data surprising, but what I do find interesting is that many modifications don’t manage to do that. In fact, fewer than half of loan modifications made at the end of last year reduced borrowers’ payments by more than that amount.

Given the amount of backing the efforts have received, surely lenders can do better. I wasn’t for all of these mortgage bailout efforts in the first place, but if we’re going to go through with it, let’s at least get it done right, eh guys?

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