Even though there are signs that the recession is ending (or even finished), the foreclosure rate is a constant reminder that we aren’t out of the woods. From the second quarter to the third, foreclosures increased 5%, with 938,000 properties sucked in. The previous quarter, 890,000 homes went into foreclosure. And, RealtyTrac forecasts 3.5 million foreclosures by the end of the year — up from around 2.3 million last year.
Unemployment is the primary culprit in the foreclosure trend. It doesn’t take a leap of common sense to see the connection: people who aren’t working are going to have trouble paying their mortgages. With the unemployment rate expected to pass 10% early next year, the foreclosure rate remain an issue through next year. Mortgage companies may help unemployed borrowers with breaks of up to six months, but this is little more than a temporary fix for everyone involved.
Of course, Washington is making a play for some props, with the Obama administration claiming that 500,000 homeowners have received help from the government, but new mortgage defaults are expected to outpace the rate at which government assistance is given. Mortgage companies are slowing down their foreclosures to determine whether their borrowers may qualify for some federal support. But, analysts in the industry don’t think this will work (because many of the borrowers won’t qualify), which is likely to result in a new wave of foreclosures.