Increasing Unemployment in November Could Trigger Off More Foreclosures

December 9th, 2008 | Tags: Foreclosures

According to the Labour Department of U.S.A., recession is growing. Increasing unemployment in November could very well trigger off more foreclosures. This is the worst rate of job loss for a generation. Pundits fear that without jobs people will default and run into foreclosure. Unemployment numbers is at its worst since the last 15 years. The rate shot up to 6.7% with the biggest monthly firing of workers in 34 years. 533,000 have lost jobs as recession worsens.

The figures being released caused alarm in the financial sector as it is now clear that foreclosures are no longer rooted to the sub-prime factor but in the unemployment issue with more and more credit worthy people losing their jobs.

Jay Brinkman of Mortgage Bankers Association said, “I see a growing delinquency problem among prime mortgages, among mortgages driven by these job loss factors.” He warned that a growing number of unemployed would result in mortgage delinquencies in the coming year. It would further cause the foreclosure cycle to pedal faster and damage the general economy. This is the first time that the group spoke bluntly about the new fears relating to the housing market. It said that nearly 10% of the outstanding mortgages of the nation was delinquent or in foreclosures from July to September this year. Brinkman explained that if the recession had not been there then it could have been said that foreclosures would peter off in 2009. But that theory can be thrown out of the window considering the intensity of the recession. He was speaking to reporters. The irony is that sub-prime caused foreclosures are on the decline but defaults are increasing in the prime conventional mortgage category that had been taken by people with good credit ratings and solid income.

Unemployment started with less skilled workers who did not own houses. But now it is going up the economic ladder. Jobless among those having technical backgrounds increased from 3.3% to 5.5% from the previous year. The joblessness among college educated people spiked from 2.2% to 3.1%. Brinkmann said, “Those are the groups most likely to be homeowners.”

The new trend was clearly visible when four times more than expected foreclosure victims turned up at a prevention programme held in Sacramento, organized by Hope Now Alliance as well as the Governor Arnold Schwarzenegger’s Task Force on Non-traditional Loans.