Ann Arbor-based financial and risk management consultant group, University Financial Associates recently issued the results of its quarterly Default Risk Index. The index revealed that the number of mortgage defaults is declining. The number of homes at risk of default or foreclosure, however remains high.
According to DSNEWS.com, the consultant firm found that the levels from the first quarter of 2010, dropped slightly from the same time the previous year. This year the index was set at 158. A year ago, the index was at 164.
The numbers prove that local economic conditions are largely determinate of what happens in the credit cycle. For example, a city with a larger job creation effort, will likely have less mortgage defaults. Jobs are a significant issue in dealing with the real estate crisis.
Unemployment Effects Mortgage Risks
This week, jobs number came out for February, and the results were less than stellar. Job growth actually stalled in February, and unemployment continued to rise. The news has the nation buzzing about a double-dip recession. Should job creation continue on the path it has, the recession will continue. Jobs have a trickle down effect, making cash either readily available or not available at all. When consumer spending is low, the economy responds in kind.
As it stands now, the government has developed a number of programs to help tide the flood of mortgage defaults and foreclosures. Under the Home Affordable Refinance Program (HARP), underwater homeowners may be eligible to modify their mortgage loans. Many, however, remain stuck in unaffordable mortgages and the banks simply cannot process the refinances fast enough.
UFA based its index on a new model that includes both prime and nonprime loan data. Nonprime loans are loans given to consumers with bad credit or no credit. These loans actually help consumer repair their credit rating. Prime loans, on the other hand are given to those with a good credit rating.
The index found that nonprime lenders and investors should expect defaults on loans to be higher than previous loans in the 1990’s. Moreover, they expect home prices to continue to decline, but only for a short time. As home prices stabilize, fewer will default on their mortgage.
source:dsnews.com
Written by Lani Shadduck
HULIQ.com
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
