Even as home prices tentatively rise, the gorilla in the room is growth in delinquent loans.Delinquent loans are up for several reasons. Obama is doing everything he can to prevent foreclosures, which means more mortgages languish in delinquency. More Americans are poorer than ever, and are unable to pay the mortgage. Others have caught the default contagion and may be flirting the idea of a strategic default.
What happens if delinquent loans become foreclosures and flood the market is a severe drop in home prices.
The evidence is in the latest Mortgage Monitor from LPS.
While delinquent loans present a huge risk, other aspects of the housing market are getting better.
Better loan practices will decrease the number of new delinquencies. A strong-enough recovery in prices could salvage underwater mortgages, removing the incentive to default.
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