Mortgage Crisis Giving More Woes To The Economy

Mortgage Crisis Giving More Woes To The Economy



Mortgage Crisis Giving more Woes to​ the​ Economy
The economic scenario seems to​ be getting worse as​ the​ financial sector continuously reporting huge losses from exposure to​ the​ mortgage market .​
Even the​ residential sector,​ the​ commercial real estate sector,​ and sectors like credit cards,​ auto loans are moving to​ a​ negative territory and are quite at​ risk.
However,​ default mortgage rates this year have already shaken the​ financial sector .​
And now it​ is​ expected that millions of​ adjustable rate mortgages will reset,​ giving higher interest rates (according to​ the​ new loan agreement),​ which is​ just impossible for the​ homeowners to​ pay .​
But the​ homeowners,​ who are having $600 billion of​ subprime adjustable rate mortgage loans that is​ the​ ARM,​ are about to​ reset at​ higher amounts during the​ next eight months .​
Its not all the​ mortgages that are in​ trouble but homeowners who default or​ fall behind on​ the​ payments are a​ problem.
Now the​ situation is​ such that this mortgage crisis is​ forcing people to​ get out of​ their homes,​ besides hampering the​ economy as​ a​ whole .​
It is​ expected that the​ housing slump may get worse by more empty homes in​ the​ market,​ causing prices to​ plunge by up to​ 40% in​ real estate spots,​ such as​ California,​ Florida,​ and Nevada.
According to​ a​ recent report by the​ Goldman Sachs,​ the​ estimated industry wide losses from declines in​ the​ market value of​ subprime mortgage related collateralized debt obligation,​ to​ be almost $150 billion .​
Moreover,​ the​ third quarter write-off settled down at​ $18 billion from the​ financial firms but some firms indicated that the​ write-off in​ the​ fourth quarter would come to​ $22 billion .​
However,​ the​ losses could even hit $300 billion,​ as​ estimated by the​ Organization for Economic Cooperation and Development.
This worse situation of​ the​ housing sector is​ resulting into bigger problems,​ that is​ the​ unemployment and the​ higher consumer losses .​
It is​ estimated that almost 100,​000 financial services jobs related to​ the​ credit and lending have already been lost,​ from local bank loan officers to​ traders dealing in​ mortgage backed securities .​
And moreover,​ this kind of​ countless job losses would curtail consumer spending that makes up two-thirds of​ the​ economy .​
However,​ thousands of​ workers of​ the​ housing industry could loss their job and it​ is​ expected that this would affect the​ car dealers,​ retailers and other dependent on​ the​ consumer paychecks badly.
Other indication shows that borrowers who took out loans in​ the​ first six months of​ this year are already falling behind on​ their payments as​ compared to​ the​ borrowers who took out loans last year .​
And this is​ making it​ harder for would be buyers to​ get new mortgages .​
This is​ infact,​ is​ a​ frightening indication for the​ homebuilders with projects going begging on​ the​ market,​ and also for the​ homeowners desperate to​ unload property to​ avoid default on​ their loans.
Besides these sectors,​ there is​ one more vital sector that is​ foreclosure .​
The number of​ homes in​ foreclosure is​ expected to​ move high after more than doubling during the​ third quarter as​ compared to​ year earlier,​ to​ 446,​726 homes nationwide .​
This is​ one foreclosure filing for every 196 households in​ the​ nation,​ a​ 34% jump from three months earlier.




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