Expect more cheap foreclosed properties in the coming months. This is the bleak prognosis given by economists and executives who attended the Mortgage Bankers Association's (MBA) annual conference in San Diego, California. They said that unemployment has replaced subprime mortgage as the main factor driving up default rates.
Experts are quite pessimistic about the future situation in the country's housing market and mortgage industry despite signs that property prices have bottomed out and the 5 percent mortgage rates.
Members of the MBA said that they expect the number of cheap foreclosed properties in the country to increase before leveling off, probably by late 2010. They blamed the continuing increase in unemployment rate for the anticipated rise in foreclosure rate. They said that adjustable subprime mortgages have been replaced by job losses in pushing the number of foreclosures to the roofs.
MBA chief economist Jay Brinkmann predicted that the number of job losses would increase through the next summer and will result to a staggering number of defaults due to loss of income. He added that it would also be even harder to keep distressed homeowners in their houses by loan modification.
On the mortgage customer service home front, the sector continues to struggle with the effects of the increasing number of delinquencies and demand for mortgage modifications.
As a result, industry experts said that foreclosures are expected to rise in the latter part of 2009, adding that if the numbers start to come down, it is going to be in a very slow pace.
Participants in the MBA conference had mixed emotions during the event. Loan originators were in a celebratory mood following a boost in mortgage refinancing as a result of a 5 percent drop in fixed-rate loans' interest rates.
However, the increase in mortgage refinancing is expected to slow down by next year as interest rates will start to rise. Experts predicted that the total mortgage volume will decline to $1.5 trillion next year from $2 trillion this year even if home purchase loans are projected to rise by 12 percent.
Other projections made by the group are the increase of fixed mortgage rate by 5.6 percent before the end of 2010 and the decline in refinancing activity which could lead to more cheap foreclosed properties.
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