Whether they were put on the defensive by charges of inaction or whether they were simply telling it as it is, executives at the Mortgage Bankers Association annual conference in San Diego this week spoke with one voice when explaining why loan modifications weren’t happening faster – and weren’t helping the economy all that much.
It’s the unemployment, stupid.
Since before the federal government instituted its own plan with lenders and servicers to modify loans for troubled homeowners, the servicers have been under fire for not doing enough to keep struggling borrowers in their homes. But now the servicers are fighting back, saying that all of their best efforts can’t speed the recovery if the U.S. continues to flirt with double-digit unemployment rates.
“We will be dealing with a different kind of borrower,” MBA president John Courson said at his group’s conference. In effect, he was saying that a borrower’s mortgage terms mattered far less than his or her ability to stay employed, married and healthy.
But the government’s Home Affordable Modification Program “just doesn’t work for these people,” Courson told reporters. “You can’t go to 31 percent if there is no income,” he said, referring to a HAMP rule that requires a borrower’s mortgage debt not exceed 31 percent of his or her wages.
Also at the conference Tuesday, the MBA’s chief economist Jay Brinkman said unemployment likely would continue to rise above 10 percent through next summer, and delinquencies would continue to rocket through the end of 2010.
“The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment and lower levels of business investment and home construction,” he said.
“Even when unemployment comes down,” he continued, “it will come down very slowly.”
That pessimism was echoed at the conference by Freddie Mac CEO Charles Haldeman. Haldeman said even rehiring businesses were slow to add personnel, and unemployment was the key reason homes were still being lost to foreclosure.
He and Brinkmann predicted that all this would spell a longer, harder recovery for the housing industry than many market observers were now expecting. Brinkmann said median home prices likely would continue to decline through the beginning of next year.
FHA Commissioner David Stevens acknowledged as much at the conference on Monday. “We’re forecasting about another 10 percent, roughly, price decline between now and the first quarter next year,” he said.
It’s the unemployment, stupid.
Since before the federal government instituted its own plan with lenders and servicers to modify loans for troubled homeowners, the servicers have been under fire for not doing enough to keep struggling borrowers in their homes. But now the servicers are fighting back, saying that all of their best efforts can’t speed the recovery if the U.S. continues to flirt with double-digit unemployment rates.
“We will be dealing with a different kind of borrower,” MBA president John Courson said at his group’s conference. In effect, he was saying that a borrower’s mortgage terms mattered far less than his or her ability to stay employed, married and healthy.
But the government’s Home Affordable Modification Program “just doesn’t work for these people,” Courson told reporters. “You can’t go to 31 percent if there is no income,” he said, referring to a HAMP rule that requires a borrower’s mortgage debt not exceed 31 percent of his or her wages.
Also at the conference Tuesday, the MBA’s chief economist Jay Brinkman said unemployment likely would continue to rise above 10 percent through next summer, and delinquencies would continue to rocket through the end of 2010.
“The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment and lower levels of business investment and home construction,” he said.
“Even when unemployment comes down,” he continued, “it will come down very slowly.”
That pessimism was echoed at the conference by Freddie Mac CEO Charles Haldeman. Haldeman said even rehiring businesses were slow to add personnel, and unemployment was the key reason homes were still being lost to foreclosure.
He and Brinkmann predicted that all this would spell a longer, harder recovery for the housing industry than many market observers were now expecting. Brinkmann said median home prices likely would continue to decline through the beginning of next year.
FHA Commissioner David Stevens acknowledged as much at the conference on Monday. “We’re forecasting about another 10 percent, roughly, price decline between now and the first quarter next year,” he said.
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