Mortgage Late Payments, Defaults at All Time Highs
Not good news for the economy. A drop in consumer spending could be quite bad news for the economy and future growth.
WASHINGTON – Late mortgage payments shot up to a 3 1/2-year high in the final quarter of last year and new foreclosures surged to record levels as borrowers with tarnished credit histories had trouble keeping up with monthly payments.
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.
That marked a sharp rise from the third-quarter’s delinquency rate of 4.67 percent and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97 percent.
The latest snapshot of the mortgage market stoked Wall Street investors’ worries about troubles facing “subprime” lenders who make loans to people with poor credit. The Dow Jones industrials tumbled 242.66 points.
This Bloomberg article has a bit more information.
The Mortgage Bankers Association said foreclosures are climbing on loans to borrowers with the best credit ratings, a sign of broader trouble in the housing market. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index all had their steepest retreats since a global rout two weeks ago.
“If this really does turn into a nasty downturn in housing, no one really knows what the implications for the economy will be,” said Kevin Bannon, who oversees $120 billion as chief investment officer at Bank of New York Co. “These things basically raise concern about whether we’re slipping into a recession.”
The S&P 500 slid 28.65, or 2 percent, to 1377.95. All 10 of its industry groups declined.
The Dow average sank 242.66, or 2 percent, to 12,075.96 for only its second drop of more than 200 points since May. The Nasdaq decreased 51.72, or 2.2 percent, to 2350.57.
The prices for banks and mortgage lending institutions also took hits as well. If these problems in the housing market spill over into other areas of the economy then things look less optimistic. It doesn’t mean that there has to be a recession, but I think it is reasonable to say that it does raise the probability that the economy might go into recession. Already, retail sales have been lower than expected in February. Perhaps that is just a temporary blip, but it might also be signs of growing weakness in the economy.