Sunday, September 6, 2009

Snohomish County, WA. Unemployment Spike Compounds Foreclosure Crisis

HomeSeeker Center

By Don Sieb

Snohomish County unemployment reached 10.1% (June 2009) and is overtaking subprime mortgages as the main driver of foreclosures threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind. If you think you are not effected by this think again! Nearly 45% of listed homes for sale in Snohomsih County are some type of distressed property sale.These sellers must sell their properties which drags down homes values for all of us., the real estate data company, estimates 13.5 million single-family homes in America are now in negative equity -- in other words, the property is worth less than the mortgage(s). That's 23% of those homes with mortgages. Moody's puts the numbers even higher, at around 16 million.

From the end of 2006 through March 31, it says, the total market value of U.S. household real estate fell from $21.9 trillion to $17.9 trillion. That's about 18%. (The lost wealth works out at just over $13,000 for every person in the country.)

Barney Frank (D-Mass.), chairman of the House Financial Services Committee, has proposed using $2 billion in government rescue funding to provide emergency loans to these borrowers. "We are going to be seeing more foreclosures because of prolonged unemployment," he said. "These are people who weren't in trouble and wouldn't be in trouble if they hadn't lost their job."

Unlike the borrowers with subprime mortgages who helped ignite the housing downturn more than two years ago. Last year, about 40 percent of borrowers who sought help at Hope Now, a large housing counseling group, cited unemployment or a pay cut as a primary reason for their delinquency. Now it is about 65 percent. The number citing a subprime loan fell significantly.

During extended periods of unemployment, the borrower accrues large late fees that drive up monthly payments and a new job often comes with lower pay, making it more difficult to catch up. Banks and government regulators are studying how to address the shifting nature of the crisis, which has been exacerbated by falling home prices. When the housing crisis began in 2007, the unemployment rate was about 4.6 percent in Snohomish County. It hit 10.1 percent last month.

Hope Now, a government-backed group of mortgage lenders, has established a task force to look at how to best help unemployed borrowers. One strategy involves creating new types of loan modifications. Currently, unemployed borrowers have few options to save their homes. Some Banks often will allow two or three missed payments, known as forbearance, to give borrowers time to find a job. Others offer to temporarily lower their payments by 50 percent. But both of these options are not permanent and are ill-suited to the current crisis, consumer advocates and industry officials say. Part of the problem is that it is taking longer for borrowers to find new employment -- a three-month suspension of payments often is not enough.

We need to engage our local congressional representives and Sate government public officals to push for action to put an end to this foreclousure crisis.

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