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Michael White is the CEO of The New Mortgage Company. He has seventeen years in real estate as lender, owner, and mortgage originator. He has purchased and sold more than 275 properties for his own account, made hundreds of real estate loans for his portfolio, and originated hundreds of mortgages as a broker.

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One in Ten Mortgage Borrowers Will Lose Their Home To The Bank

New Observations is forecasting that a minimum of one in ten homes with a mortgage today will be lost to foreclosure in the next two years and that this loss represents a staggering five-million-unit addition to inventory-for-sale.

A record high 4.63% of mortgages were in foreclosure at the end of March The Mortgage Bankers Association reported Wednesday. Much worse, a mammoth 9.54% of mortgages are 90-days or more past due.

Given cure rates are slim-to-nothing-at-all beyond a 60-day delinquency, in practical terms, all of these seriously-delinquent homes will be lost through a sheriff’s auction, a short sale, a deed-in-lieu passing title from borrower to bank, or some other variant of distressed sale. Amherst Securities Group in a Sept. 2009 report said of the cure rate: “The cure rate on 60+ loans has decreased from 66% in early 2005 to 5% in Q2 2009.”

What is obvious and apparent from the cure-rate chart (see above-click for a clear view) is that borrowers who miss a payment are giving up quickly. After two payments are missed, the mortgage is a goner. It’s a new phenomena and adds a serious risk of falling prices for those who currently own homes.

If 50 million homes carry a mortgage, and with 10 percent lost to the bank in the next two years, five million units will be added to the current for-sale inventory. The five million bank-repo homes works out to about 10 months of sales at an average rate. Amherst estimated 7 million liquidations to the bank, but it was unclear over what period of time. The numbers will have even a more exaggerated impact if mortgage-payment performance continues to fall.

Current inventory is at eight months. The recent inventory high was 11 months in April 2008. Our figures already show current supply for-sale at 3.6 million units – which we have estimated is excessive by over 900,000 units (see chart “Units For Sale”-click for a clear view). In an average month 500,000 existing homes sell.

In another derogatory sign, purchase applications fell 27 percent to their lowest point since May 1997. A government-paid down-payment program ended April 30th.

The guesstimate that one-in-ten mortgage borrowers will lose their home is not a wild proclamation. It’s basic math based on the cure rate. What is wild is considering what will happen to real estate prices should mortgage failure gain greater momentum. Serious delinquencies are 30% greater today than a year ago.

A crash has the same irrational exuberance as a mania. We have already lost 30 percent of house prices nationwide. There is simply no question that a radical loss in value may still lie ahead. Mortgage performance has gone down hill, and only a strong employment recovery can change the math.

***

PRINT — One in Ten Mortgage Borrowers Will Lose Their Home

On the mortgage-payment data see also Calculated Risk. Please forward questions, corrections, and reactions to comments below or send me an email. mike@mynewmortgage.com

Michael David White is a mortgage originator in Chicago.

There Are 9 Responses So Far. »

  1. Mike

    Based upon my observations, it is likely to be 1 in 8 or even worse.

    Patrick Pulatie
    Loan Fraud Investigations

  2. [...] New Observations is forecasting that a minimum of one in ten homes with a mortgage today will be lost to foreclosure in the next two years and that this loss represents a staggering five-million-unit addition to inventory-for-sale. A record high 4.63% of mortgages were in foreclosure at the end of March The Mortgage Bankers Association reported Wednesday. Much worse, a mammoth 9.54% of mortgages are 90-days or more past due. Given cure rates are slim-to-nothing-at-all beyond a 60-day delinquency, in practical terms, all of these seriously-delinquent homes will be lost through a sheriff’s auction, a short sale, a deed-in-lieu passing title from borrower to bank, or some other variant of distressed sale. Amherst Securities Group in a Sept. 2009 report said of the cure rate: “The cure rate on 60+ loans has decreased from 66% in early 2005 to 5% in Q2 2009.” What is obvious and apparent from the cure-rate chart (see above-click for a clear view) is that borrowers who miss a payment are giving up quickly. After two payments are missed, the mortgage is a goner. It’s a new phenomena and adds a serious risk of falling prices for those who currently own homes. If 50 million homes carry a mortgage, and with 10 percent lost to the bank in the next two years, five million units will be added to the current for-sale inventory. The five million bank-repo homes works out to about 10 months of sales at an average rate. Amherst estimated 7 million liquidations to the bank, but it was unclear over what period of time. The numbers will have even a more exaggerated impact if mortgage-payment performance continues to fall. More Here.. [...]

  3. Please do not FORGET about the most censored story of the decade – the FIVE MILLION unemployed american engineers, replaced by fakers and frauds from India who arrive on the H-1B visa. How many thousands of engineers are going to have to blow their brains out before someone gives a damn?

  4. [...] One in Ten Mortgage Borrowers Will Lose Their Home to the Bank New Observations is forecasting that a minimum of one in ten homes with a mortgage today will be lost to foreclosure in the next two years and that this loss represents a staggering five-million-unit addition to inventory-for-sale. http://blog.ml-implode.com/2010/05/one-in-ten-mortgage-borrowers-will-lose-their-home-to-the-bank/ [...]

  5. 1865. ABRAHAM LINCOLN’S 18 POINT – GREEN BACK – MONETARY DECLARATION

    1. Money is the creature of law and the creation of the original issue of money should be maintained as the exclusive monopoly of national Government.

    2. Money possesses no value to the State other than that given to it by circulation.

    3. Capital has its proper place and is entitled to every protection.

    4. The wages of men (however) should be recognised in the structure of and in the social order as more important than the wages of money.

    5. No duty is more imperative for the Government than the duty it owes the People to furnish them with a sound and uniform currency, and of regulating the circulation of the medium of exchange so that labour will be protected from a vicious currency, and commerce will be facilitated by cheap and safe exchanges.

    6. The available supply of Gold and Silver being wholly inadequate to permit the issuance of coins of intrinsic value or paper currency convertible into coin in the volume required to serve the needs of the People, some other basis for the issue of currency must be developed, and some means other than that of convertibility into coin must be developed to prevent undue fluctuation in the value of paper currency or any other substitute for money of intrinsic value that may come into use.

    7. The monetary needs of increasing numbers of People advancing towards higher standards of living can and should be met by the Government.
    Such needs can be served by the issue of National Currency and Credit through the operation of a National Banking system.

    8. The circulation of a medium of exchange issued and backed by the Government can be properly regulated and redundancy of issue avoided by withdrawing from circulation such amounts as may be necessary by Taxation, Redeposit, and otherwise.

    9. Government has the power to regulate the currency and credit of the Nation.

    10. Government should stand behind its currency and credit and the Bank deposits of the Nation. No individual should suffer a loss of money through depreciation or inflated currency or Bank bankruptcy.

    11. Government possessing the power to create and issue currency and credit as money and enjoying the right to withdraw both currency and credit from circulation by Taxation and otherwise need not and should not borrow capital at interest as a means of financing Governmental work and public enterprise.

    12. The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of the consumers.

    13. By the adoption of these principles the long felt want for a uniform medium will be satisfied.

    14. The taxpayers will be saved immense sums of interest, discounts, and exchanges.

    15. The financing of all public enterprise, the maintenance of stable Government and ordered progress, and the conduct of the Treasury will become matters of practical administration.

    16. The people can and will be furnished with a currency as safe as their own Government.

    17. Money will cease to be master and become the servant of humanity.

    18. Democracy will rise superior to the money power.

    Dated 1868

    PS: SURPRISE SURPRISE – He was shot 3 days later.
    PPS: WHETHER HE ACTUALLY WROTE IT – AND I HAVE NO DOUBT THAT HE DID – HE IMPLEMENTED IT!!!

  6. PPPS – THE WORD MORTGAGE IS DERIVED FROM 2 NORMAN FRENCH WORDS MORT as in DEATH – GAGE as in GRIP ie: DEATH-GRIP SO DON’T BE SURPRISED ABOUT IT’S EFFECTS ON SOCIETY

  7. THIS IS SIMPLY HISTORY REPEATING ITSELF:
    The American Bankers Association Stated – That:
    “On September 1st 1894 – we will not renew our loans under any consideration.
    “On September 1st we will demand our money.
    “We will foreclose and become mortgagees in possession.
    “We can take two-thirds of the farms west of the Mississippi, and thousands of them east of the Mississippi as well, at our own price…
    “Then the farmers will become tenants as in England…,”
    1891 American Bankers Association – As printed in the Congressional Record of April 29, 1913.
    David Pidcock – Forum For Stable Currencies – London

  8. [...] The guesstimate that one-in-ten mortgage borrowers will lose their home is not a wild proclamation. It’s basic math based on the cure rate. What is wild is considering what will happen to real estate prices should mortgage failure gain greater momentum. Serious delinquencies are 30% greater today than a year ago. A crash has the same irrational exuberance as a mania. We have already lost 30 percent of house prices nationwide. There is simply no question that a radical loss in value may still lie ahead. Mortgage performance has gone down hill, and only a strong employment recovery can change the math. http://blog.ml-implode.com/2010/05/one-in-ten-mortgage-borrowers-will-lose-their-home-to-the-bank/ [...]

  9. [...] Michael White at Implode-O-Meter, a forecaster’s warning that one home in ten will be foreclosed within the next 24 months: New [...]

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