Unless The Foreclosure Storm Abates Nothing Can Be Done To Recover The Economy

January 7th, 2009 | Tags: Foreclosure

With each passing day it is becoming clear that unless the foreclosure storm abates nothing can be done to recover the health of the American economy. But a recent report submitted by the Comptroller of Currency has thrown cold water on any hopes of improvement in the future.

The report has surveyed the figures of the third quarter and there is no evidence of the foreclosure clouds clearing. The survey studied the condition of nine national banks and five thrifts – Morgan Chase, Citygroup, Bank of America, Wells Fargo etc. These hold in their portfolios 60% of all the mortgages of the country.

For some time the number of foreclosures was showing a downward curve mainly because of temporary relief measures. The effect too was temporary, as it did not address the basics. New foreclosure moves fell to 281,298 in the third quarter by 2.6%. But the number of foreclosures that had run its full course increased by 8%, those undergoing it jumped by 11% to touch 617,642.

Another disturbing trend noted in the report was that half of those loans that had been modified began to default again – lagging behind 30 days in payment by the close of September.

The report is not comprehensive as it was only in February that the OCC wanted the nine financial bodies to submit their records. The idea was to find out means of improving the performance of mortgages. It had come late as the housing crisis had kick started about two years ago. It seems that the problems in the housing and building sectors will hover around the bottom for quite some time to come. For two years henceforth its fortunes will not change. For the economy this is not good news. Nor is it encouraging for those who are involved in investing in the building sector.

The coming year of 2009 will see a number of mortgages resetting their interest rates to higher niches. This will start off another round of foreclosures – especially so because the real estate is in the doldrums and the employment climate is going from bad to worse. Also depressing is the fact that now commercial properties will start falling into foreclosure. The results of this will be more disastrous with the shutting down of shops, malls and business houses leading to more lay offs.