For years, bad loans and their aftershocks have been sending homeowners into foreclosure. Now it's lost jobs that are putting troubled borrowers over the edge.
As the economy tanks, unemployment is the major factor driving a much larger proportion of foreclosures now than in the earlier stages of the mortgage meltdown.
In June, 45.5% of all delinquencies reported by Freddie Mac were due to unemployment or the loss of income, according to the company. That's an increase from 36.3% in 2006.
"The two economic factors that most contribute to foreclosures are falling home prices and rising unemployment," said Richard DeKaser, chief economist for National City Corp (NCC, Fortune 500). "It's hard to pay your mortgage when you don't have a job."
And that's a situation that more and more people are finding themselves in. Nearly one million Americans have lost their jobs in 2008. The Bureau of Labor Statistics reported in early October that 159,000 private sector jobs were lost in September, and on Friday, economists expect the BLS to report that 200,000 jobs were lost in October.
"The rise in job losses will increase and extend the delinquency trend," said Doug Duncan, the chief economist for mortgage giant Fannie Mae (FNM, Fortune 500). Foreclosures spiked 71% in September alone according to RealtyTrac.
As this post being being composed the October numbers came out - unemployment rose to 6.5%, with a cut of 240,000 jobs. This will just add to the foreclosure levels. Probably another spike next month. With the increased unemployment levels and the shaky economy the holiday season is bound to be flat, with probably decline over the past several years growth.
How much of an impact will President-Elect Obama's 90-day foreclosure moratorium have on the spiral downward?