Hoping to flatten or stabilize somewhat mortgage delinquencies ; many government agencies including the FDIC, Fannie Mae (FNM), and Freddie Mac (FRE) have increased their efforts to adapt to the borrowers needs. They have applied in their strategies in hopes of ameliorating the situation from tax breaks for homebuyers, aid packages for financially troubled homeowners to backstopping the shaky mortgage market. However, the severity of the capital markets crisis continues and despite their well-intentioned efforts ; the results so far have been anything but encouraging.
Citing a report from First American CoreLogic, a Santa Ana, California-based seller of mortgage and economic data – Bloomberg said more than 8.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion last year.
An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent, the report said.
The total value of residential properties in the U.S. fell to $19.1 trillion by the end of 2008, down from $21.5 trillion a year earlier.
California leads the geographical distribution of underwater mortgages.
It lost more than $1.2 trillion in value last year, accounting for roughly half of the national decline in housing values…(Calif. had the most underwater borrowers in the fourth quarter with 1.9 million).
Unless economic conditions improve in both the labor and financial markets, the mortgage sector will unfortunately, continue to experience increases in the delinquency rate and the distress is likely to grow as home values shrink.