Mortgage Delinquencies Gain among People with Good Credit

[Apr 3, 2009.]

 

More people than ever are falling behind on their mortgage payments, including those who have good credit. Despite efforts to stem the foreclosure crisis, many of the people who are missing monthly payments on their mortgage are those with Alt-A and prime mortgages, according to a government report.

The report by the Comptroller of the Currency and Office of Thrift Supervision looked at about 34.7 million U.S. mortgage loans and found that about 10% were behind on monthly payments. That compares with about 7% of mortgage loans that were behind in September.

More borrowers with prime loans who have good credit and made sizable down payments on their mortgages are falling behind on payments. Also falling behind more and more are people with Alt-A loans, which are given to borrowers with good credit who made smaller down payments or had no proof of their income.

Many borrowers have sought assistance through the government’s loan modification program and through assistance from their lenders. Those who have had the most success keeping up with their housing costs are those who had monthly payments on their mortgages reduced.

The study shows that having monthly mortgage payments reduced more than 10% resulted in fewer re-defaults. President Barack Obama’s housing recue plan calls for lenders to reduce mortgage loan payments to 31% of borrowers’ income.

Before the current rescue plan many borrowers received workouts that did not low their payments and are struggling to keep up with unchanged or higher monthly payments. Homeowners who are seeking help with the mortgages to avoid foreclosure should remember a few things:

—It’s better to seek help as soon as possible to avoid the foreclosure process.

—Borrowers having trouble making monthly payments on their mortgage should visit makinghomeaffordable.gov to see if they qualify for help through the government’s housing rescue plan.

—If they qualify for help through the Obama plan, people who are current on their mortgages will have their loans refinanced.

—Borrowers who are struggling to stay current or are already behind will have loans modified under the rescue plan.

Homeowners who don’t qualify for help through the government’s rescue plan may still want to contact their lenders to see if they can work out a deal. Current mortgage rates are so low that people who still have a lot of equity in their home could shave thousands of dollars of their interest payments over the life of their loan. Current mortgage rates on 30-year fixed mortgages are around 4.78%. 

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.