Lisa Simpson
Feb 3,2010
In: Foreclosures

Experts Predict Increase in Unemployment in 2010

Experts predict increase in unemployment in 2010.

In 2009, a record number of foreclosures happened – 2.8 million households received foreclosure filings. That number is expected to increase in 2010 as unemployment increases and house owners are not able to remain current on mortgage payments.

In fact, the percentage of homes that got foreclosure notice increased by 21 per cent in ‘09 as compared to ’08. One in every 45 houses was issued a notice, which included default notice, bank possessions and auctions. In December ’09, a total of 349,000 homes got a foreclosure notice. That means one in every 366 homes got the foreclosure notice. When compared to November ’08, it meant an increase of 14 per cent and a 15 per cent increase when compared to December ’08.

Banks claimed above 92,000 houses. This represented an increase of 19 per cent when compared to November. The increase could be because lenders are working overtime to clear the accounts books.

Experts agree that stemming foreclosures is important for the recovery of the economy. That is because foreclosures are sold off at discounted prices that can only damage the reputation of the neighboring houses. It also brings down the value of the houses in the neighborhood. Also cities lose dollars by way of skipped property taxes from vacant houses and foreclosed properties. Although prices of homes have stabilized, yet they are down by 30 per cent from what they were in the mid ’06.

What is plaguing experts is that the crisis of foreclosures shows no signs of abating. As senior vice president of RealtyTrac, Rick Sharga, says another 3 to 3.5 million houses are expected to be foreclosed this year. The Federal Government has come up with the Making Homes Affordable Program to stem the tide of foreclosures. As part of this program, the loans of borrowers are being modified, first on an experimental basis of three months, and then permanently. Lenders said that trial modifications have been offered to 760,000 borrowers. Loan modification actually translates to lowering of the interest to be paid or sometimes even the principal. Whatever be the case, the payments are much lower.

Sharga says that foreclosures will be triggered off by rising unemployment and reduced income. Earlier, it was those who had taken subprime loans had formed the major pie of the defaulters. Now it is the salaried class who had taken traditional loans now comprises the quickest growing group.