Mortgage crisis hindering recovery

by Alan Zibel Associated Press May. 20, 2010 12:00 AM

WASHINGTON - The mortgage crisis is dragging on the economic recovery as more homeowners fall behind on their payments.

Analysts expect improvement soon, but the number of homeowners in default or at risk of foreclosure will have a lingering effect on the broader economy.

More than 10 percent of homeowners with a mortgage had missed at least one payment in the January-March period, the Mortgage Bankers Association said Wednesday. That's a record high and up from 9.1 percent a year earlier.

A big jump in the number of borrowers who have missed three months of mortgage payments drove the increase.

One encouraging sign is that the number of homeowners just starting to show trouble is trending downward. As of March, nearly 3.5 percent of borrowers had missed one month of mortgage payments, down from about 3.8 percent a year earlier.

About 4.3 million homeowners, or about 8 percent of all Americans with a mortgage, are at risk of losing their homes, the trade group's top economist estimates.

Should loan-modification programs fail to help, their homes will go up for sale either as a foreclosure or short sale, which is when the bank agrees to sell the property for less than the original mortgage amount.

Many analysts have been forecasting that prices will dip again as more of these homes go up for sale at deeply discounted prices.

"It's certainly a weight on the economy," said Mark Zandi, chief economist at Moody's Analytics, who predicts home prices will fall about 5 percent and hit bottom next spring.

Federal tax credits boosted home sales this spring, but they expired last month. As a result, mortgage applications to purchase homes fell to the lowest level in 13 years this week, the Mortgage Bankers Association said in a report Wednesday.

Read more: http://www.azcentral.com/arizonarepublic/business/articles/2010/05/20/20100520biz-homeforeclosures0520.html#ixzz0omRxqtdj

Mortgage crisis hindering recovery