Wednesday, June 3, 2009

Causes of Mortgage Default

In a May 28 post on the Wall Street Journal's "Developments" blog... the writer, Nick Timiraos, poses the question: "Why do Homeowners Default?" and looks at the data released Federal Reserve Bank of Atlanta.

Their findings? Here's the highlight:

The Fed paper estimates that a 1-percentage-point increase in the unemployment rate boosts the chance of a 90-day delinquency by 10%-20%, and a 10-percentage point fall in house prices raises the probability of a default by more than half. A 10-percentage-point jump in the debt-to-income ratio, meanwhile, increases the chance of a 90-day delinquency by 7%-11%.

This actually tracks closely with the data that the MN Home Ownership Center highlighted in its 2008 Foreclosure Program Report:

Half of home owners reported facing either a decline in income (35%) or job loss
(15%) as a primary driver in their mortgage struggles.

Here's what the Center found when it analized the data from the statewide network of counselors:

Increase in loan payment was only cited 9% of the time as the reason for default!

No matter what the reason you, or someone you know may be falling behind... HELP IS AVAILABLE. For more information, click here.

Hat Tip: BubbleMeter

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