A few days ago the Wall Street Journal released an article entitled “Mortgage Delinquencies Hit Three Year Low”, in which they discussed this positive trend; however they seem to have brushed over several issues which are worth discussing further in detail.
While the WSJ pointed out and discussed the fact that at the end of 2011 7.6% of all residential mortgages were at least 30 days late on their payment, and that this figure is down from 8.3% one year prior, they didn’t go much further.
In fact they seemed to chalk the phenomena up to increased employment, and then moved on. The next item that was discussed was that while delinquencies had decreased foreclosures were still high, and practically unchanged from a year earlier. My question, and the reason for this article, is: Couldn’t the job market be unrelated to this change? Wasn’t it an optimistic stretch to say that delinquencies have decreased because more people have jobs?
The basis for my argument is simply that if the quantity of Foreclosures has remained unchanged, and we know that trustees’ have been auctioning homes off over the past year, can we not be reasonably assured that loans which were delinquent (30 days late) last year have moved into the foreclosure process to create this stability in the foreclosure pool? After all, if the job market has improved and those who couldn’t afford their mortgage payment were able to reconcile their delinquency due to a new job, while mortgages in foreclosures were naturally being decreased from auctioning off, wouldn’t the decrease in delinquent mortgages have been greater .7%?
I don’t mean to discredit the author but I do think that his assumption was somewhat shallow. Couldn’t another reasonable assumption be that after the last five years of foreclosures, we are starting to finally reach a point where those who were delinquent due to job loss have been cleared out; and that the feeder pool to the delinquency stats touted in the article is simply being depleted?
Furthermore, not one sentence in this article talks about a decrease in unemployment? No stats to compare, nothing.
I could sit here and hypothesize all day about different scenarios that “could have” been the impetus behind the decrease in delinquencies, but without backing it up it is nothing more than just that: a hypothesis!
-JJM
John is the Vice President here at JohnHart, and as such is responsible for managing and directing the firm towards obtaining its ultimate goals.
He is also one of our main contributors on the Blog. (please see his profile page on the main site for more information.)
