Unemployment and the foreclosure crisis.

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This week the discussion will revolve around some of the more tragic outcomes of job loss. While the MSM seems to be more focused on the “green shoots” mantra or the over-the-top displays - on both sides of the debate - at health care town halls, the MSM isn’t using its bandbox to give its viewers the reality of our current economic crises. If you are looking for a cheery read this week, you may want to focus on other areas of Allpinkslips, since this week’s stories will not be of the lighter, rose-colored-glasses variety.

This economic crisis had its genesis in financial products aimed to increase bank profits at the expense of proper lending procedures. One of the victims of lax lending standards is the mortgage holder, especially those who bought or refinanced during the housing bubble years of 2001-2007. But now you can add joblessness to the nightmare that is foreclosure as more people are laid off, more foreclosures are taking place.

The following stories show the relationship between job loss and foreclosure:

WASHINGTON — More than 13% of U.S. homeowners with a mortgage are either behind on their payments or in foreclosure as the recession throws more people out of work, the Mortgage Bankers Association said Thursday.

One in three new foreclosures between April and June was from a prime, fixed-rate loan, up from one in five a year earlier. Last year, subprime adjustable-rate loans caused the largest share of foreclosures.

Mortgage delinquencies USATODAY

The increases in prime loan foreclosure are likely in part due to job loss. And according to RealtyTrac:

“Foreclosure activity continued its upward trajectory nationwide and in the majority of metro areas in the first half of the year, but there are some significant differences beginning to show up in the data,” said James J. Saccacio, chief executive officer of RealtyTrac. “While some of the markets that had the highest saturation of foreclosures over the past few years have seen declining rates, new markets like Provo, Utah, and Boise, Idaho, have seen large increases. <b>As unemployment rates increase in different parts of the country, it’s very likely that we’ll see similar patterns develop elsewhere.” </b>(emphasis added)

Foreclosure activity - RealtyTrac

The Washington Post offers the following:

During the first three months of this year, the largest share of foreclosures shifted from subprime loans to prime loans, according to the Mortgage Bankers Association. The change to prime loans -- traditionally considered safer -- reflects the growing numbers of unemployed who are being caught up in the foreclosure process, economists say….
Last year, about 40 percent of borrowers who sought help at NeighborWorks, a large housing counseling group, cited unemployment or a pay cut as a primary reason for their delinquency. Now it is about 65 percent. The number citing a subprime loan fell significantly.

"Rising unemployment, for the sake of this downturn, has magnified things considerably," said John Snyder, manager of foreclosure programs for NeighborWorks. "It's less about the payment adjustment."

Currently, unemployed borrowers have few options to save their homes. Banks often will allow two or three missed payments, known as forbearance, to give borrowers time to find a job. Others offer to temporarily lower their payments by 50 percent. But both of these options are not permanent and are ill-suited to the current crisis, consumer advocates and industry officials say.

Part of the problem is that it is taking longer for borrowers to find new employment -- a three-month suspension of payments often is not enough. The number of unemployed people who have been looking for a job for more than 26 weeks rose more than 500,000 last month. And under the current system, once borrowers resume payments, their monthly balances rise to make up for overdue amounts…..

The program has reinforced Citigroup's conclusion that "unemployment is in fact the root cause of many of the delinquencies," said Sanjiv Das, chief executive of CitiMortgage. The trick, he said, is to give borrowers enough assistance to keep them motivated to find a job quickly so they can resume making full mortgage payments.

Under the federal foreclosure prevention program, unemployment insurance can be counted as income when a borrower applies for a modification. But the borrower must show eligibility for at least nine months of unemployment checks.

Unemployment and Foreclosures - Washington Post

Citigroup’s Sanjiv Das comment above is rather startling, considering Citigroup was given billions in bailout funds with no timetable for repayment and their shoddy lending practices where instrumental in the current housing and unemployment crisis. While Sanjiv Das may have a job at taxpayer’s expense, he is blind to the fact that millions remain on unemployment not because they don’t want a job, but because there aren’t enough jobs for all who need them!

It’s this disconnect that makes bank bailouts a worthless endeavor for the taxpayer, but that’s a subject for another day. Banks are receiving taxpayer money from the Federal Reserve at 0% interest and they are charging credit card users up to 30%, they have collected $40 billion in banking fees this year, and they were given trillions dollars (yes, trillions) to backstop their worthless investments, but they don’t feel comfortable adjusting mortgages for those in greatest need? The taxpayer loses on both ends; banks take billions of taxpayer dollars, but refuse to lend those billions to stabilize the housing problems that they caused.

Until unemployment can be tamed, foreclosures will continue to increase. While unemployment stats aren’t as bad as they were earlier in the year, the loss of 250,000 jobs - as was the August number - is still problematic. Not only did those 250,000 jobs disappear, but the additional 150,000 new jobs needed each month to merely break even, due to population increases, did not materialize. Instead of pumping more money to the likes of Citigroup and the rather clueless Sanjiv Das types, maybe it’s time to pump some of that taxpayer money back to the taxpayer who really needs it.

Tomorrow we’ll take a look at another casualty of unemployment.

Have you had issues with foreclosure? Were you able to find relief? Has unemployment, or the fear of it, changed your home purchase plans?