Yesterday, March foreclosure numbers confirmed that after a lull in January and February, the number of families getting kicked out of their homes was on the rise again. The month showed a big spike up, in part due to the fact that major banks had halted foreclosures during the previous two months, to there was a big backlog to get through.
But as HousingWire points out, there’s more to the story than just the unfreezing of the foreclosure halt. There’s also the fact that halting foreclosures, while you try to modify the mortgage just doesn’t work.
So we’re seeing a borrower backlog in the default pipeline. Are these borrowers exiting the pipeline via other means, since foreclosure hasn’t been a viable option recently? The data again suggests the answer is a resounding ‘no.’ While cure rates have been increasing in comparative terms over the course of the moratoria duration (essentially Dec. 2008 to Mar. 2009), in real terms cures remain tough to come by. According to data from Clayton Holdings, Inc., for example, the cure rate on 2007 vintage subprime first-lien RMBS in February rose 11.1% from January levels, but was still 8.16%; for 2007 vintage Alt-A first lien RMBS, the cure rate in February was up 3.73% month-over-month, but still at just 4.69%.
As we’ve written about numerous times in this space, no amount of modification can replace a lost job, or a long-term loss of income. And with 15.6% of the nation’s workforce now either unemployed or underemployed, the problems in the nation’s mortgage markets are as much a broad economic problem as they’re a problem tied to blow-and-go underwriting standards and creative loan products.
“The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium,” Field Check’s Hanson wrote in a note to clients last week. Here’s to hoping that we’ve already learned our lesson the first time around on this.
The government hopes that loan mods will prove helpful in the recovery effort, and that employed, but underwater homeowners won’t walk away if their loan is restructured. But ultimately, the problem is unemployment and as long as that keeps rising, there’s very little hope of containing the problem. Unless, as Hanson says, we introduce another moratorium.