The subprime mortgage crisis may be on its last phase but the number of bank foreclosure homes will continue to rise. This is the somewhat bleak prognosis from industry experts who claimed that the rising unemployment rate is forcing many homeowners to miss mortgage payments and hindering efforts of the federal government to alleviate the foreclosure problem.
Unemployment is said to be fueling last month’s increase in the number of bank foreclosure homes. According to data, foreclosure activity rose by 5 percent across the country in June. In St. Louis, Missouri, the number of bank foreclosures homes for sale declined by 7 percent last month but was higher by 15 percent compared with the same period last year.
The June figures are still one of the all-time highs recorded in the area. Beyond Housing President Chris Krehmeyer said that the foreclosure numbers dropped slightly but still remain at the crisis proportions.
Housing counselors in St. Louis noted that the number of people struggling with high adjustable mortgage interest rate seems to be dwindling. But they are being replaced by people who just cannot make their mortgage payments because they lost their jobs or their working hours were reduced.
According to market data, the default rate for prime mortgages is increasing. Last year, one out of 125 prime borrowers in St. Louis was delinquent for at least 90 days. In May, the figures were one in every 90.
Meanwhile, the federal government has allocated billions into programs to encourage banking institutions to refinance loans for affordable interest rates to help distressed homeowners. According to area housing counselors, the programs are having an effect as more banks are offering loan modifications.
But here lies the problem. Area counselors said that the new payment plan will work only if the troubled homeowner has money to pay. Catholic Charities Housing Resource Center director Karen Wallensak said that a loan modification will not succeed if the homeowner has no means or source of income.
Representative Barney Frank has proposed an estimated $2 billion grant for short term loan programs to help jobless homeowners save their properties from becoming bank foreclosure homes.
