The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.
Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.
The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.
The mortgage troubles have been exacerbated by an economy that is still struggling. Reports last week showed another drop in home prices, slower-than-expected economic growth and a huge loss at General Motors. On Friday, the Labor Department reported that the unemployment rate in July climbed to a four-year high.
While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.
My wife and I are thankful for the fact that (1) We’re both retired (2) When we sold our last home, we made a huge chunk of cash on the resale (3) We put down a huge chunk of cash on our new home that we had built…..knocking the bottom out of what would’ve been a high monthly payment, and (4) We avoided an adjustable rate mortgage like the plague! We secured a 30-year fixed rate mortgage, and the payments are automatically deducted from our bank account every month……for which service we receive a monthly statement from the bank.