The Delinquency Catch-22

What was suggested strongly by the latest MBA quarterly delinquency survey (see Delinquencies: Trading One Nightmare for Another) has been confirmed by a new report from TransUnion which reported is mortgage loan delinquency (the ratio of borrowers 60 or more days past due) increased for the ninth straight quarter, hitting a national average high of 5.22 percent for the first quarter of 2009, up almost 14 percent from the previous quarter’s 4.58 percent average.

Not only are mortgage delinquencies up, they are increasingly caused by overall economic conditions, not the alternative financing products and bad documentation prevalent at the height of the boom. Resets of the Subprimes, alt-As, option ARMs are supposed to be leveling off or receding.

In an editorial today the New York Times rightly blames falling home values and declares, “There will be no recovery until there is a halt in the relentless rise in foreclosures.”

But it is increasingly clear that there will be no halt the relentless rise in foreclosures until there is a recovery.

Catch-22?

Not completely. If the Obama program comes close to achieving its goal-and its payment-lowering strategy will work best for those families whose breadwinners are still employed-it will help. More buyers will help too, even if they are pushed by tax credits and pulled by bargain basement distress-sale prices. Most of all an end to economy-crippling layoffs will help.