Fiscal cliff clouds otherwise rosy outlook for mortgage delinquencies, foreclosures

by Broderick Perkins

(12/28/2012) - Reports of fewer mortgage delinquencies and foreclosures would otherwise portend of a stronger housing recovery next year.

But for homeowners on the edge of a mortgage struggle, the fiscal cliff could send them over the brink and into the ranks of more foreclosed homeowners.

The Office of the Comptroller of the Currency (OCC) reported 88.6 percent of mortgages were current in the third quarter 2012, compared to 88.0 percent a year earlier.

OCC credited the year-over-year improvement to "strengthening economic conditions, servicing transfers, and the ongoing effects of both home retention loan modification programs and home forfeiture actions."

Mortgage servicers also mounted efforts to provide alternatives to foreclosure during the quarter.

According to OCC, servicers implemented 382,899 home retention actions during the quarter, while initiating 252,604 new foreclosures. The number of home retention actions implemented by servicers decreased 8.9 percent from the prior quarter, but decreased 16.6 percent from a year earlier.

OCC also revealed the share of current mortgages, 88.6 percent, was down from 88.7 in the second quarter.

Lender Processing Services reported similar trends in its loan delinquency rates, loans 30 or more days past due, but not in foreclosure.

The year-over-year change in delinquencies dropped 9.06 percent in November compared to a year earlier. However, delinquencies were up 1.19 percent from September, a month earlier.

Without a solution for the fiscal cliff by Dec. 31, many homeowners will see their taxes rise by $3,000 a year. That's a $250-a-month reduction in take home pay, beginning with the first paycheck of the New Year.

For homeowners current, but struggling to pay their mortgage, $250 less a month could be more than enough to send them over their own fiscal cliff.

The fiscal cliff is giving consumers the jitters.

The Conference Board also reported Dec. 27 that its measure of consumer confidence dropped sharply to 65.1 in December, down sharply from a revised 71.5 last month.

Confident consumers buy homes and pay their mortgage on time. The reverse is also true.

It won't be a very Happy New Year if mortgage delinquencies and foreclosures rise.

More foreclosures could stop rising prices and the housing recovery. Less consumer spending slows economic recovery.

On Dec. 27, just four days before the end of the year, conditions on Capital Hill and Wall Street did not bode well for the immediate future.

U.S. Senate Majority Leader Harry Reid said it appeared Congress failed to avoid the fiscal cliff. Shortly after his comments, the stock market took a turn for the worse.

A new foreclosure bubble may be brewing, as mortgage delinquencies mount.

The OCC also reported the percentage of mortgages 30 to 59 days past due rose 10.4 percent from the prior quarter to 3.1 percent, a 3.6 percent increase from a year ago.

Seriously delinquent mortgages - 60 or more days past due or held by bankrupt borrowers whose payments are 30 or more days past due - remained unchanged from the previous quarter at 4.4 percent and down 10.8 percent from a year earlier, OCC reported.