The rate of foreclosures and seriously delinquent home loans has hit another record high in Connecticut and the nation – and the trend will be influenced next year by job losses rather than the subprime mortgage crisis.
A report Friday from the Mortgage Bankers Association showed that more home loan borrowers are finding it difficult to make their monthly payments. And another report Friday demonstrated that little relief is in sight: The country’s employers slashed 533,000 jobs nationwide in November, the largest monthly total in 34 years.
“Jobs are going to be the key thing,” said Donald L. Klepper-Smith, an economist at DataCore Partners Inc. in New Haven. “Jobs create income, income creates spending and that income influences what we see in the housing market.”
As of Sept. 30, more than 2.3 million home mortgages nationally were either in foreclosure or were 90 days past due, amounting to 5.2 percent of total loans. That compares with 2 million, or 4.5 percent, as of June 30.
In Connecticut, the figure was 18,600 home mortgages, about 3.5 percent of all home loans. The state had 16,560 home mortgages in foreclosure or 90 days past due as of June 30, or 3.1 percent of the total.
Nationally, the foreclosure crisis is worst in states such as California, Florida and Nevada. But the pain is being felt broadly across the country. Connecticut is faring better than most states, including neighboring Massachusetts and Rhode Island, and ranked in the bottom half of states in total number of home mortgage delinquencies.
The number of foreclosure proceedings starting in Connecticut in the three months ended Sept. 30 was flat compared with the previous quarter, even though overall delinquencies continue to rise.
Jay Brinkman, chief economist for the Mortgage Bankers Association, said that may be because of short-term foreclosure moratoriums by some lenders and shouldn’t necessarily be taken as a sign that foreclosure troubles are subsiding.
Connecticut Banking Commissioner Howard Pitkin said he’s seeing some encouraging progress in borrowers’ using the state’s new mediation program, which brings delinquent borrowers and creditors together to work out new loan terms. But participation is still small, just one in four troubled borrowers, he said.
Calls to the banking department’s foreclosure hot line are averaging about 20 a day, about half the number of three months ago. In 18 months, the hot line has logged 6,190 calls.
Until now, the foreclosure crisis has been fueled by defaults on subprime mortgages, many approved for borrowers who could not afford them over the life of the loan. Now, with the prospect of a deepening recession and massive job losses, employment will be the main driver, and the threat of foreclosure could spread to borrowers with good credit who don’t have savings to fall back on if they lose their jobs.
Klepper-Smith predicted that job losses will be more severe than in the last recession, when the state lost 60,000 jobs, but not as bad as the decline of 160,000 jobs in the recession between 1989 and 1992.
