Wall Street Journal: Delinquent Mortgages Set to Nearly Double in 2009

I've written many times about why "it's different this time" is that housing usually falters well into a recession, not falling before the recession. We have 2 major legs in this downturn and are currently in a period where these 2 spheres overlap - first the housing collapse/credit contraction and THEN the Main Street recession - retail sales fall off, job losses, et al. What is unique to this housing downturn is the first legs of it had nothing to do with typical macro economic conditions - it was a bunch of people put into homes they could never afford under terms that made no sense to anyone...

So as I drink down the Kool Aid and look forward to the pundit promised "2nd half 2009" recovery (folks who've been reading this site for a while remember this same conversation last winter and spring when we scoffed at the "2nd half 2008" recovery - just change the number at the end of the year and keep putting the same pundits on financial TV) I continue to try to hide my eyes from things such as facts and sense. When I look at those our dreams of unicorns, butterflies, and 2nd half recoveries look a little less tangible. As this situation degrades, I'm thinking of completely unimagined solutions the US government will embark on... I am working through some of these mentally as I prepare my 2009 Outlier Predictions. But until those potential government solutions I'm thinking of can be proposed and completely blow us away in their scope and magnitude, we'll look at projections such as this... (I think it gets worse because people are still underestimating where unemployment will be next year, and further still use the nonsensicial government data for unemployment statistics) Remember as of September 6.6% of of mortgages were at least 30 days past due - and we really have just begun the flood of job losses in October [Sep 23: Loan Delinquencies Continue to their Path Upward] That's why I find the TransUnion data "rosy" versus what should really happen (ex 2009 government interference)

• The number of consumers with delinquent mortgages is poised to almost double by the end of next year, hitting its highest level in at least 16 years, according to a leading credit bureau.
• TransUnion LLC, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009. That would be the highest level reached since the Chicago credit bureau -- which is releasing the data on Tuesday -- first started tracking these statistics in 1992. It compares with an expected delinquency rate of 4.67% at the end of 2008.
• The big culprit is adjustable-rate mortgages that were underwritten several years ago, when lending standards were loose. "There are a lot more loans that will be resetting throughout 2009 through 2011," says Ezra Becker, principal consultant in TransUnion's financial-services group, who notes that rising unemployment and depreciating home values are other contributing factors. "There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now."

[Oct 9: WSJ - Nearly 1 in 6 Homes Underwater]
[Sep 26: 15% of Americans Spend 50%+ of Income for House Payments]
[Aug 12: Bloomberg: One Third of New Home Buyers in Past 5 Years Now Underwater]
[Aug 4: WSJ - After the Bubble, Ghost Towns Across America]
[Jul 10: Foreclosure Activity Map]
[Mar 19: Alt A Mortgages Beginning to Breakdown]