The Housing Non-Recovery

Fourteen percent of America's 56 million mortgages are already delinquent or in foreclosure. So if you multiply 56 million by 14%, that means that 7.8 million people right now are not paying their mortgages. 7.8 million homeowners have been delinquent for 30, 60 or 90 days...or are in foreclosure already. 91% of the people who are currently not paying are never going to get back to current, according to recent statistics. So that means that of 7.8 million people not paying their mortgage, 7.2 million are never going to get back. So that's a problem. 7.2 million homes. 7.2 million mortgages will go into foreclosure...eventually.



And the real story is even worse than the nearby chart suggests. Because of loan modification programs, the government, banks and servicers have dramatically slowed down the foreclosure process. The banks have been modifying everybody, slowing down the foreclosure pipeline and not taking properties onto their books.

So what this means is that the rate of NON-foreclosure on delinquent borrowers is climbing sharply. As the nearby chart illustrates, 24% of the people who have not made a mortgage payment during the last two years have still not been foreclosed on. That's how clogged the foreclosure pipeline is.


So what's going on? Well, there are a lot of modifications going on the past year. But modifications don't really work very well. It turns out that even when you cut someone's mortgage payment by 50% or more, half of them still default within 12 months. The re-default rate is astronomical...even when you cut the monthly payments dramatically.

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