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Archive for the ‘Mortgage Meltdown’ Category

Credit Card Payment More Important Than House Payment?

In an unprecedented shift, for some consumers having a credit card in good standing appears to have taken priority over having a roof over one’s head, experts said.

While overall consumer debt rose unexpectedly in January, consumers continued to pay off their credit cards that month — a record 16th straight month of lower credit-card debt — with such debt dropping about $1.7 billion to $864.4 billion, according to the Federal Reserve on Friday.

But a small slice of those consumers are paying down credit cards to the detriment of their mortgage loan. The number of consumers delinquent on their mortgages but current on their credit cards rose to 6.6% in the third quarter of 2009 from 4.3% in the first quarter of 2008, according to a TransUnion study of 27 million anonymous consumer records pulled randomly from its database. Meanwhile, the portion of those who fell behind on credit-card payments but paid their mortgage dropped to 3.6% from 4.1%.

The trend is more common among consumers with the lowest credit scores. The percentage of consumers with low scores who paid credit cards rather than home loans shot up to 29% in the third quarter of 2009 from 19.1% in the fourth quarter of 2007, according to TransUnion. And in that low-credit-score group, consumers falling behind on credit cards but keeping pace with mortgage payments declined to 14.5% in 2009 from 18.1% in the first quarter of 2008.

GMAC Loses $5 Billion in Fourth Quarter

NEW YORK (Reuters) – GMAC Financial Services, a lender that has received more than $16 billion from the U.S. government across multiple bailouts, said it lost $5 billion in the fourth quarter after writing down bad mortgage assets.

GMAC, one of the largest car loan makers in the United States, said in December that it did not expect to record more major losses from its mortgage unit. Home loans fueled GMAC’s growth earlier this decade but have since triggered billions of dollars of losses for the company.

The fourth-quarter loss compares with net income of $7.5 billion in the fourth quarter of 2008.

Home Foreclosures Jump 23%

Oct. 15 (Bloomberg) — U.S. foreclosure filings climbed to a record in the third quarter as lenders seized more properties from delinquent borrowers, according to RealtyTrac Inc.

A total of 937,840 homes received a default or auction notice or were repossessed by banks, a 23 percent increase from a year earlier, the Irvine, California-based seller of default data said today in a report. One out of every 136 U.S. households received a filing, the highest quarterly rate in records dating to January 2005.

“The problem is prime loans going into foreclosure and people being underwater and losing their jobs,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, said in an interview. “It’s a really bad number.”

Mounting foreclosures mean U.S. home prices probably will resume falling, analysts from Amherst Securities Group LP in New York said Sept. 23. A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005, they said.

Home Foreclosures Not Stopping Anytime Soon

Every 13 seconds in America, there is another foreclosure filing. That’s the rhythm of a crisis that threatens to choke off hopes for a recovery in the U.S. housing market as it destroys hundreds of billions of dollars in property values a year.

There are more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a nonpartisan watchdog group based in Durham, North Carolina. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon.

If anything, the country’s worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment.

Home Prices May Fall Another 25%

Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.

“No bank underwrote a loan with 10 percent unemployment on the horizon,” Whitney said. “I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when.”

Local governments and states are chronically under-funded and “most states are under water,” adding to the problem of low private consumption, she said.